Client account reconciliations every five weeks (SRA Accounts Rules, rule 8.3)
Ashby Lane Solicitors LLP holds a general client account and two separate designated deposit client accounts holding large sums for estates in long-running administrations. The firm's cashier, Gareth Pryce, reconciles the general client account every two months by comparing the bank statement balance with the cash book balance. He signs the reconciliation himself. He does not reconcile the designated deposit accounts at all, because he says the money in them rarely moves. The firm's COFA, Leila Haddad, asks what the SRA Accounts Rules require.
Which of the following best describes the firm's obligation?
Choose one answer to see the reasoning.
Worked answer
Correct answer C: Reconcile all client accounts at least every five weeks against the cash book and client ledgers, signed off by the COFA or a manager.
THE RULE TO REMEMBER
At least every five weeks, every client account must be reconciled three ways (bank statement, cash book and client ledger total), with the record signed off by the COFA or a manager.
Client account reconciliations every five weeks (SRA Accounts Rules, rule 8.3)
Rule 8.3 of the SRA Accounts Rules requires a firm to complete at least every five weeks, for all client accounts it holds or operates, a reconciliation of the bank or building society statement balance with the cash book balance and the client ledger total. A record of the reconciliation must be signed off by the COFA or a manager of the firm, and any differences must be promptly investigated and resolved. The designated deposit accounts are client accounts, so they must be reconciled too, however rarely the money moves. Gareth's practice breaches rule 8.3 in three ways: the interval is too long, it is only a two-way comparison that leaves out the client ledger total, and the sign-off is by the cashier rather than the COFA or a manager. Under rule 6.1 the firm must correct the breach promptly on discovery.
Why A is wrong: Two months exceeds the five-week maximum, and sign-off must be by the COFA or a manager, not the cashier.
Why B is wrong: Rule 8.3 covers all client accounts, including designated deposit client accounts.
Why D is wrong: The rule 12 accountant's report is separate; reconciliations are required at least every five weeks.
Why E is wrong: Rule 8.3 requires a three-way reconciliation that includes the client ledger total.
That's today's practice done. Another featured question tomorrow.
Related questions
Client account must not be used as a banking facility (SRA Accounts Rules, rule 3.3)
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Transferring client money for costs: bill first (SRA Accounts Rules 4.3)
Which of the following best describes what the firm must do before transferring the money?
Interest on estate money held in client account during an administration (rule 7)
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