by John McCarthy Consulting Ltd. | Mar 3, 2024 | News
Following on from last week’s blog about the introduction of the new Solicitors Accounts Regulations 2023, it’s worth bearing in mind that the existing Solicitors Accounts Regulations 2014 remain applicable for any accounting period that commenced before 1 July 2023, until such time as the solicitor has filed the Reporting Accountant’s report with the Law Society.
Here is a list of some of the changing and new requirements for the accounting by solicitors:
- Balancing statements must be prepared quarterly for client-account transactions;
- A list of client ledger balances outstanding for two years or more must be prepared at the accounting date, and given to the Law Society by the Reporting Accountant;
- A separate client bank account is no longer needed where a solicitor is acting as the personal representative of an estate;
- Client ledger balances must be reviewed for undue/unnecessary delays in discharging client moneys. Immediate action must be taken to clear same, where appropriate;
- Clients are to be given a statement of account for each matter;
- Client moneys are to be returned to clients when the legal service is completed;
- Evidence of payments in cash must include the witnessed signature of the recipient;
- Transfers of funds from the ‘client’ to the ‘office’ account must be for specific clients;
- The Law Society must be notified where a deficit cannot be rectified within seven days of the deficit coming to the solicitor’s attention;
- Cheque signatories or transaction authorisers on the client account are to include a solicitor who is a partner or a sole practitioner with a current practising certificate;
- A ‘Register of Undertakings’ and of ‘Funds Held On Joint Deposit’ are to be maintained;
- A file of documents or record for electronic transfers must be maintained;
- The Compliance Partner is to provide specific confirmation to the Law Society, through the ‘Form of Acknowledgement’, of compliance with the regulations in respect of:
- balancing statements;
- balances outstanding two years or more;
- review of client-ledger balances for undue or unnecessary delays; and
- back-up of computerised accounting systems.
- Borrowing/lending/organising loans from/to Client Accounts are prohibited, as are loans between Client Accounts;
- Client accounts must not hold moneys other than for the legal services provided;
- Client accounts are not to be used to hold/pass through, solicitors’ personal moneys;
- Responsibility for breach of the regulations extends to the solicitor responsible for the actual breach, and not just the principal or partners of the firm;
- The Law Society may conduct investigations remotely;
- The Law Society may instruct an authorised person to communicate with such persons and seek such information and documentation as the Society considers necessary.
The full text of the Regulations is here.
All our courses are listed here.
Please also go to our website to see our:
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- AML Webinar (December 2023) available here, which accompanies the AML Manual. It explains the latest legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please contact John McCarthy FCA by e-mail at john@jmcc.ie.
- We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Mar 3, 2024 | News
The Law Society of Ireland has introduced new Solicitors Accounts Regulations 2023 which came into operation on 1 July 2023. Among the changes, there are new requirements for reporting accountants.
From 1 July 2023 reporting accountants must:
- Examine Balancing Statements prepared at quarterly intervals in respect of client-account transactions (currently these are examined at six monthly intervals);
- File reports within five months of the accounting date;
- Test-check that withdrawals of fees are notified to the clients;
- Test-check postings before and after the accounting date;
- File the Closing Reporting Accountant’s Reports within three months of cessation;
- Provide reasons for the withdrawal of approval of a Reporting Accountant;
- Report, directly to the Law Society, an opinion or a suspicion of a deficit, rather than waiting to submit an annual report; and
- Provide to the Law Society a list of any client ledger balances outstanding for two years or more prepared as at the accounting date.
The full text of the Regulations is here.
All our courses are listed here.
Please also go to our website to see our:
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- AML Webinar (December 2023) available here, which accompanies the AML Manual. It explains the latest legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please contact John McCarthy FCA by e-mail at john@jmcc.ie.
- We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Oct 17, 2023 | Blog, News
The IAASA Ethical Standard for Auditors (Ireland) 2020 (the Standard) became effective on 15 July 2021. This blog addresses the main requirements of the Standard in so far as it applies to auditors of non-listed private entities.
It is the purpose of this blog to address issues affecting non-listed/private entities. Please refer to the Irish Audit & Accounting Supervisory Authority Ethical Standard 2020 if your interest is in Public Interest/Listed Entities and firms that are part of international networks.
Fee Dependence
Section 4 of the Standard sets percentage limits on the proportion of total fee income that can be earned from an audited entity. These limits are often referred to as ‘fee dependence’. The limits may be exceeded in certain circumstances, without triggering negative consequences. It’s of great importance to keep a record of when these limits are exceeded, for which clients and to maintain a log of the corrective action taken, when the limits are exceeded.
Where it is expected that the total fees for services receivable from a non-listed entity that is not a public interest entity and its subsidiaries relevant to a recurring engagement by the firm will regularly exceed 15% of the annual fee income of the firm or, where profits are not shared on a firm-wide basis, of the part of the firm by reference to which the engagement partner’s profit share is calculated, the firm shall not act as the provider of the engagement for that entity and shall either resign or not stand for reappointment, as appropriate.
Time to resign or expand
Where the total annual fees for audit and non-audit services regularly (defined below) exceed 15% of the firm’s annual fee income, the firm must not accept/continue the audit appointment. Obviously advance planning is required when this situation is on the horizon e.g. expand the firm through merger, so as to dilute the fee dependency position below the 15% threshold or plan to resign. (IAASA Ethical Standard paragraph 4.36).
Between 10% and 15%
Whether or not the limits can be exceeded, depends on certain specific circumstances. Detailed guidance can be found in paragraphs 4.36 to 4.46 of the standard. We pay special attention to the word ‘regularly.’
For non-listed private entities the fee dependence limit is 10%. Where fees for the entity and its subsidiaries regularly exceed 10% of the firm’s annual fee income, but fall below 15%, the firm may determine it is possible to continue to act subject to:
- disclosure to the firm’s Ethics Partner/Function;
- disclosure to those charged with governance of the audit entity; and
- completion of an external independent quality control review prior to the finalisation of the audit report (IAASA Ethical Standard paragraph 4.43).
The table below summarises the fee dependency levels discussed above.
| Type of client |
Normally
acceptable |
Further action required |
Unacceptable if regular |
| Non listed/private entities |
Not more than 10% |
More than 10% but not exceeding 15% |
Exceeding 15% |
Definitions:
Definitions in the area of ethics and audit are often of critical importance to reaching the correct answer. Here is a list of the main definitions that apply:
Firm’s Annual Fee Income – this is the annual fee income as billed by the firm for the provision of services but excludes income where the firm acts as agent for another party (e.g. if the firm is a subcontractor).
Sole practitioners – The limits may be more difficult for a sole practitioner to apply, but the Standard helpfully includes a footnote to paragraph 4.34 confirming that as a sole practitioner, annual fee income includes all earned income received by the individual. This is because the firm (the sole practice) and the individual are effectively one and the same. Monies received from pensions can also be considered as ‘earned income’ as they arise from past earnings.
Engagement partners – Where the profit share for the engagement partner is derived from only part of the firm, the reference to firm should be taken to mean that part of the firm only.
What Does Regularly Mean? – Although there is no definition in the Standard of the term ‘regularly’ a sensible approach is set out in a 2021 information sheet from the ICAEW (unfortunately available to members only) that states that where income from an audited entity has exceeded the limits for three consecutive years, it has become a ‘regular’ event. In such circumstances it would be difficult to argue that it would be acceptable to continue to act.
Special Circumstances – There are some limited circumstances in which the fee limits may be exceeded such as:
- Engagements assigned by legislation – The fee dependence limits do not apply to engagements of entities where the responsibility for the engagement is assigned by legislation and the firm cannot resign from the engagement, irrespective of considerations of economic dependence (e.g. for certain public sector bodies) (IAASA Ethical Standard paragraph 4.33).
- Unpredictable events – Where fee limits are exceeded as the result of an unpredicted individual event or engagement and an objective, reasonable and informed third party would consider ceasing to act as detrimental or against the public interest, the firm may be able to continue subject to disclosure and adequate safeguards (IAASA Ethical Standard paragraph 4.38).
- Starting a new practice – A new firm seeking to establish itself may find it difficult to comply with the fee limits. For a period not exceeding two years, a firm may exceed the 15% limit for non-listed audited entities which are not PIEs, subject to an external independent quality control review before the audit report is issued (IAASA Ethical Standard paragraph 4.44).
- Small entities – For small entities the firm may be able to claim the relief given in paragraph 6.5 of the IAASA Ethical Standard Provisions Available for Audits of Small Entities (PAASE) and dispense with the need for an external review provided the disclosure required by paragraph 6.5 is made. See paragraph 6.4 of the IAASA Ethical Standard for a definition of what constitutes a ‘small entity’.
IT Controls Assessment
Auditors are reminded that there are relatively significant changes in the requirements of ISA 315 Identifying and Assessing the Risks of Material Misstatement for accounting periods commencing 15 December 2021, which in practical terms means, accounting periods Ended 31 December 2022 and later.
Auditors dealing with the audits of entities with such accounting periods affected by these change will need, to adopt new audit programmes and, in additional to the normal audit tests, to also assess the entity’s IT controls (no matter what the size of that entity).
This is a significant new development for auditors of SMEs, in particular, and will be a game changer ion the type of audit documentation and evidence of assessment of such IT controls by the auditor on audit files.
For an easy to implement additional (two page) IT Controls Questionnaire to help document the above process, please click on this link to download immediately for only €60 + VAT.
Please also go to our website to see our:
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please contact John McCarthy FCA by e-mail at john@jmcc.ie.
We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Apr 28, 2023 | News
Following on from our earlier blogs on 11 April and 18 April about the introduction of the new Solicitors Accounts Regulations 2023, we thought that a worked example about the transition to the new rules, would be helpful.
The existing Solicitors Accounts Regulations 2014 remain applicable for any accounting period that commenced before 1 July 2023, until such time as the solicitor has filed the Reporting Accountant’s report with the Law Society. The full text of the Regulations is here.
The 2023 Regulations apply for accounting periods commencing on/after 1 July 2023. Let’s take two practical examples to clarify the position:
Law Firm Client with YE 30/4/2023 – apply the existing 2014 regulations for the full financial year to 30/4/2023 because the 2023 regulations don’t commence until 1 July 2023.
Apply the 2023 regulations from the accounting period starting on 1 May 2024 for this client, with the first quarterly test being on 31 July 2024.
Law Firm Client with YE 31/12/2023 – the existing 2014 Regulations apply for the full financial year 2023 and the new 2023 Regulations apply to this client from 1 January 2024 with the first quarterly reconciliation happening on 31 March 2024.
Please go to our website to see our new ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please contact John McCarthy FCA by e-mail at john@jmcc.ie.
We typically tailor training and brainstorming sessions to suit your firm’s unique requirements.
Publications and AML webinars:
- The ISQM TOOLKIT 2022 is available to purchase here.
- See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
- To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
by John McCarthy Consulting Ltd. | Apr 7, 2023 | News
Following on from last week’s blog about the introduction of the new Solicitors Accounts Regulations 2023, it’s worth bearing in mind that the existing Solicitors Accounts Regulations 2014 remain applicable for any accounting period that commenced before 1 July 2023, until such time as the solicitor has filed the Reporting Accountant’s report with the Law Society.
Here is a list of some of the changing and new requirements for the accounting by solicitors:
- Balancing statements must be prepared quarterly for client-account transactions;
- A list of client ledger balances outstanding for two years or more must be prepared at the accounting date, and given to the Law Society by the Reporting Accountant;
- A separate client bank account is no longer needed where a solicitor is acting as the personal representative of an estate;
- Client ledger balances must be reviewed for undue/unnecessary delays in discharging client moneys. Immediate action must be taken to clear same, where appropriate;
- Clients are to be given a statement of account for each matter;
- Client moneys are to be returned to clients when the legal service is completed;
- Evidence of payments in cash must include the witnessed signature of the recipient;
- Transfers of funds from the ‘client’ to the ‘office’ account must be for specific clients;
- The Law Society must be notified where a deficit cannot be rectified within seven days of the deficit coming to the solicitor’s attention;
- Cheque signatories or transaction authorisers on the client account are to include a solicitor who is a partner or a sole practitioner with a current practising certificate;
- A ‘Register of Undertakings’ and of ‘Funds Held On Joint Deposit’ are to be maintained;
- A file of documents or record for electronic transfers must be maintained;
- The Compliance Partner is to provide specific confirmation to the Law Society, through the ‘Form of Acknowledgement’, of compliance with the regulations in respect of:
- balancing statements;
- balances outstanding two years or more;
- review of client-ledger balances for undue or unnecessary delays; and
- back-up of computerised accounting systems.
- Borrowing/lending/organising loans from/to Client Accounts are prohibited, as are loans between Client Accounts;
- Client accounts must not hold moneys other than for the legal services provided;
- Client accounts are not to be used to hold/pass through, solicitors’ personal moneys;
- Responsibility for breach of the regulations extends to the solicitor responsible for the actual breach, and not just the principal or partners of the firm;
- The Law Society may conduct investigations remotely;
- The Law Society may instruct an authorised person to communicate with such persons and seek such information and documentation as the Society considers necessary.
The full text of the Regulations is here.
Please go to our website to see our new ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please contact John McCarthy FCA by e-mail at john@jmcc.ie.
We typically tailor training and brainstorming sessions to suit your firm’s unique requirements.
Publications and AML webinars:
- The ISQM TOOLKIT 2022 is available to purchase here.
- See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
- To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
