SRA’s Decisions
The SRA is consulting on a return to mandatory submission of all accountants’ reports. The proposals include:
- Mandatory annual declaration that all firms must complete to provide a record of compliance
- Submission of all accountants’ reports (both qualified and unqualified) to provide improved data for the regulator
- Direct submission by accountants – reporting accountants must submit reports directly to the SRA
- Fixed financial penalties for firms that submit late or provide incomplete declarations
- COLP/COFA restrictions – firms with turnover exceeding £600,000 cannot have unilateral decision-makers occupying both key compliance roles (applies to approximately 3,525 firms, nearly 40% of the total)
Additional proposals on “more timely” information requirements for firms significantly changing their profile through mergers, acquisitions or sales will be published next year.
Industry Response
A recent SRA spot-check revealed concerning levels of non-compliance:
- Of 596 firms surveyed, 25 non-exempt firms had not obtained an accountant’s report for their last reporting period
- A further 31 firms obtained their report after the six-month deadline
The regulator has also observed a recent increase in large firm failures and identified harms arising from firms “growing beyond their competence, capacity or capability.”
Key Factors
- 2014 rule change: Since 2014, firms have only been required to submit qualified reports to the regulator, creating oversight gaps
- Client money risk: The SRA states that “information provided in accountants’ reports can help to identify firms that are placing client money at risk”
- High-risk firms: The 3,525 larger firms affected by the COLP/COFA restrictions represented high client money balances and accounted for the highest-value claims to the compensation fund
- Enhanced oversight goal: The proposals are “designed to enhance oversight without placing unnecessary burden on firms”
- Concentration of power risks: Recent failures highlighted dangers when a single individual holds significant power alongside compliance roles
Read the full article here.