Accountant's Report for Legal Profession

Accountant's Report for Legal Profession | Bestar

Accountant's Report for Legal Profession

An Accountant's Report for the Legal Profession in Singapore is a mandatory document required by the Law Society of Singapore. It serves as a verification of a solicitor's or law firm's financial standing and adherence to the accounting regulations set forth by the legal profession.

Here's a breakdown of the key aspects:

Purpose:

• Ensures proper bookkeeping and adherence to the Legal Profession (Solicitors' Accounts) Rules.

• Provides transparency to the Law Society regarding a solicitor's financial activities.

Who Needs it:

• Every solicitor practicing alone or as part of a firm (partnership, limited liability law partnership, or law corporation).

Submission:

• Submitted annually along with the application for a practicing certificate.

• Deadline: within six months after the end of the accounting period.

Content:

• Follows a prescribed format specified in the Legal Profession (Accountant's Report) Rules.

• Involves a qualified accountant's examination of the solicitor's books and accounts.

• Includes details like:

  • Verification of the accounting period.

  • Confirmation of adherence to the Solicitors' Accounts Rules.

  • Any identified discrepancies or non-compliance issues.

The Legal Profession (Accountant's Report) Rules necessitate the involvement of a qualified accountant who meets specific criteria:

• Must be a practicing public accountant in Singapore authorized under the Accountants Act.

• Must maintain complete independence from the law firm throughout the engagement.

• Section 73 of the Legal Profession Act and the Legal Profession (Accountant’s Report) Rules (R 10)

Section 73 of the Legal Profession Act (LPA) in Singapore pertains to the Accountant's Report. It mandates that every solicitor applying for a practicing certificate must submit an accountant's report to the Registrar of the Supreme Court. This report, prepared by a qualified accountant, essentially provides an independent verification of the solicitor's or their law practice's financial records and compliance with the Legal Profession (Solicitors' Accounts) Rules (R 8).

Key aspects of Section 73 LPA include:

• Requirement for Accountant's Report: Unless a solicitor satisfies the Council of the Law Society that it's unnecessary due to their specific circumstances, they must deliver this report with their practicing certificate application.

• Content of the Report: The report must state that the accountant has examined the books, accounts, and documents of the Singapore law practice for the specified accounting period. It must also state whether the accountant is satisfied that the law practice has complied with the Legal Profession (Solicitors' Accounts) Rules. If not satisfied, the report must detail the areas of non-compliance.

• Accounting Period: Unless rules specify otherwise, the accounting period should begin after the last reported period and cover at least 12 months.

• Rules by Council: The Council of the Law Society is empowered to make rules regarding the information to be included in the accountant's report.

• Modified Application for International Practices: Solicitors practicing Singapore law in Joint Law Ventures, Qualifying Foreign Law Practices, or Licensed Foreign Law Practices may have modified requirements for submitting an accountant's report, potentially submitting it to the Attorney-General instead of the Registrar.

The Legal Profession (Accountant’s Report) Rules (R 10) provide the detailed framework and procedures for the accountant's report required under Section 73 of the LPA. These rules elaborate on:

• Citation and Definitions: Sets out the name of the rules and defines key terms.

• Qualifications of Accountant: Specifies who is qualified to give an accountant's report, emphasizing their independence from the solicitor or law practice. The Council of the Law Society has the discretion to disqualify an accountant.

• Extent of Examination: Details the scope of the accountant's examination, including reviewing the bookkeeping system, conducting test checks on client and conveyancing accounts, and verifying financial transactions against the Legal Profession (Solicitors' Accounts) Rules.

• Form and Content of Accountant's Report: Prescribes the format of the report, including the solicitor's details, the accounting period, a statement of compliance (or non-compliance) with the Solicitors' Accounts Rules, and any identified breaches.

• Delivery of Report: Specifies that the report should be delivered to the Registrar with the application for a practicing certificate.

• Accounting Period for Solicitors Ceasing to Hold Client Money: Addresses specific scenarios where a solicitor stops handling client or conveyancing money, allowing for a shorter accounting period.

• Notification by Council: Outlines the process by which the Council can notify a solicitor that an accountant is not qualified to provide the report.

In essence, Section 73 of the LPA establishes the requirement for an independent financial check on solicitors' practices through the accountant's report, while the Legal Profession (Accountant’s Report) Rules (R 10) detail how this requirement is to be met, ensuring accountability and adherence to the rules governing solicitors' accounts.

• Rule 4 of the Rules

Rule 4 of the Legal Profession (Accountant’s Report) Rules (R 10) in Singapore focuses on the Extent of Examination that a qualified accountant must undertake when preparing the accountant's report required under Section 73 of the Legal Profession Act.

This rule lays out the specific procedures and checks the accountant needs to perform to form an opinion on whether the law practice has complied with the Legal Profession (Solicitors' Accounts) Rules (R 8).

Key aspects covered under Rule 4 include the accountant being required to:

• Enquire into the system of bookkeeping: The accountant needs to understand the accounting system employed by the law practice to handle client and conveyancing money. This includes assessing the adequacy of the system for compliance with the Solicitors' Accounts Rules.

• Make test checks of the books and accounts: The accountant is not expected to perform a full audit of every transaction. Instead, they conduct sample testing of the records related to client accounts and conveyancing accounts to ensure proper recording and handling of these funds.

• Verify bank balances: The accountant will typically verify the balances held in client accounts and conveyancing accounts with the relevant financial institutions to confirm the accuracy of the law practice's records.

• Examine documents relating to transactions: This involves reviewing supporting documentation for selected transactions to ensure they are properly authorized and recorded in accordance with the Solicitors' Accounts Rules. Examples include payment vouchers, receipts, and transfer instructions.

• Obtain explanations and information: The accountant has the right to seek explanations and information from the solicitor or the law practice's staff as deemed necessary to carry out their examination and form their opinion.

• Consider compliance with specific Solicitors' Accounts Rules: The examination will specifically focus on whether the law practice has adhered to the requirements of the Solicitors' Accounts Rules, such as the proper segregation of client money, the timely recording of transactions, and the maintenance of adequate records.

In essence, Rule 4 provides the practical guidelines for the accountant's work, ensuring that the accountant's report is based on a reasonable level of scrutiny and provides a meaningful assessment of the law practice's compliance with the rules designed to protect client funds. It bridges the legal requirement in Section 73 of the LPA with the practical steps needed to fulfill that requirement.

• Legal Profession (Solicitors’ Accounts) Rules (R 8)

These are the crucial regulations that govern how solicitors and law practices must handle money belonging to their clients. They are designed to ensure the safety and proper accounting of these funds, preventing misuse and maintaining trust in the legal profession.

These rules are quite detailed, but some of the key principles and areas they cover include:

• Obligation to Keep Client Money in a Client Account: This is a fundamental principle. Solicitors must keep money held on behalf of clients separate from their own funds in a designated "client account" maintained with an approved bank.

• Distinction Between Client Money and Other Money: The rules clearly define what constitutes "client money" and outline the procedures for handling other types of funds belonging to the law practice.

• Operation of Client Accounts: The rules specify who can operate client accounts and the conditions under which withdrawals can be made. This often requires specific mandates and proper authorization.

• Record Keeping Requirements: Solicitors are obligated to maintain detailed and accurate records of all transactions involving client money. This includes ledgers for individual clients, cash books, and records of transfers. The rules often specify the level of detail and the retention period for these records.

• Accounting Procedures: The rules may outline specific accounting procedures that must be followed, such as regular reconciliation of client accounts with bank statements to ensure accuracy.

• Handling of Specific Types of Money: The rules might address the handling of specific types of client money, such as conveyancing money held in escrow or money held for deceased estates.

• Withdrawals from Client Accounts: The rules strictly limit the circumstances under which money can be withdrawn from a client account. Generally, withdrawals are only permitted for proper payments to the client or on the client's instructions.

• Prohibition Against Using Client Money for the Firm's Benefit: This is a critical aspect. Solicitors are strictly prohibited from using client money to finance their own business operations or for any personal gain.

• Consequences of Non-Compliance: Failure to comply with the Solicitors' Accounts Rules can have serious consequences for a solicitor, potentially leading to disciplinary proceedings by the Law Society, including suspension or being struck off the roll of advocates and solicitors.

These rules work in tandem with Section 73 of the Legal Profession Act and the Legal Profession (Accountant’s Report) Rules (R 10). The Accountant's Report, prepared under Rule 10 and mandated by Section 73, essentially provides an independent check on whether a law practice is adhering to the requirements laid out in the Legal Profession (Solicitors’ Accounts) Rules (R 8).

Think of the Solicitors’ Accounts Rules as the detailed "how-to" guide for managing client money responsibly and ethically within the legal profession in Singapore. They are essential for maintaining the integrity of the profession and safeguarding the interests of clients.

• Rule 4(1)(f) of the Legal Profession (Accountant’s Report) Rules (R 10)

Rule 4(1)(f) of the Legal Profession (Accountant’s Report) Rules (R 10) in Singapore outlines a specific aspect of the Extent of Examination that the reporting accountant must undertake.

Specifically, Rule 4(1)(f) requires the accountant to:

(f) ascertain whether the solicitor or the Singapore law practice has complied with rule 7 of the Legal Profession (Solicitors’ Accounts) Rules (R 8) relating to the keeping of a separate ledger account for each client and containing certain particulars;

In simpler terms, when preparing the Accountant's Report, the accountant must check if the solicitor or law practice is adhering to Rule 7 of the Legal Profession (Solicitors’ Accounts) Rules (R 8). This particular rule within the Solicitors' Accounts Rules mandates that a separate ledger account must be maintained for each individual client.

Furthermore, Rule 7 of the Solicitors' Accounts Rules specifies the particulars that must be included in each client ledger account. These typically include:

• The name of the client.

• A clear description of the matter for which the money is held.

• The date of each transaction.

• Details of all money received on behalf of the client.

• Details of all money paid out on behalf of the client.

• A running balance of the money held for the client.

Therefore, when an accountant is conducting their examination under Rule 4 of the Accountant's Report Rules, they must specifically verify that the law practice is maintaining these individual client ledger accounts with all the required information as stipulated by Rule 7 of the Solicitors' Accounts Rules.

This requirement ensures transparency and accountability in the handling of client funds. By having a separate ledger for each client, it becomes easier to track the money belonging to each individual and to ensure that funds are properly accounted for and used only for the intended purposes. It's a fundamental aspect of safeguarding client interests and maintaining the integrity of solicitors' financial practices.

Resources:

• Legal Profession (Accountant's Report) Rules

• A 9-Step Checklist for Your Accountant's Report: https://v1.lawgazette.com.sg/2000-2/Feb00-34.htm

• AGS 5 (REVISED) Audits of Entities in Specific Industries, Professions or Vocations: https://isca.org.sg/docs/default-source/annual-report/isca-annual-report-2022-23_lrv2.pdf

Additional Notes:

• While the report provides financial assurance, it's not a complete audit.

How Bestar can Help

Bestar can assist with an Accountant's Report for the Legal Profession in Singapore in several ways:

• Preparation:
  

  • Gathering and organizing financial records according to the specific format mandated by the Law Society of Singapore. This includes ensuring all necessary documentation pertaining to client accounts, conveyancing accounts, and office accounts are compiled.

  • Performing essential calculations to ensure the accuracy of financial data presented in the report. This may involve verifying transactions, reconciling bank statements, and calculating balances.

• Compliance:
  

  • Adhering to the regulations set forth in the Legal Profession (Solicitors' Accounts) Rules. Bestar has a general understanding of these rules to identify potential discrepancies or non-compliance issues during our examination.

• Review and Analysis:
  

  • While not a complete audit, Bestar can provide insights and recommendations based on our review of the financial information. This may involve identifying areas for improvement in bookkeeping practices or highlighting potential risks associated with financial management.

• Liaison (with limitations):
  

  • Bestar can assist with communication regarding the Accountant's Report submission process. However, it's crucial to note that we cannot directly liaise with the Law Society on the solicitor's behalf regarding any potential compliance issues identified during the report preparation.

It's important to understand that Bestar's services may not constitute a comprehensive audit.

Consult with Bestar. We are a qualified accountant specializing in the legal profession. Bestar can provide valuable assistance with the preparation and compilation of the Accountant's Report for the final review and sign-off. This ensures adherence to all legal requirements and regulations.

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