This information reflects the Society's web site at the date you downloaded or printed it and you should check at www.lawscot.org.uk to see if it is still current.

Accounts certificates

The Financial Compliance Department has updated the advice on accounts certificates to provide firms with further assistance and to avoid any confusion. Firms must ensure they use the appropriate form of certificate, up-to-date copies of which can be downloaded here:

Schedule 1 Accounts Certificate (Client Funds)
Schedule 2a - Accounts Certificate (No Client Funds - SLAB)
Schedule 2b - Accounts Certificate (No Client Funds - Agent)

Information and guidance on completion of accounts certificates is set out below. For further assistance, please contact a member of the Financial Compliance Department on 0131 476 8197 or email fincomp@lawscot.org.uk.

Obligation to deliver a certificate

In accordance with rule 14 of the accounts rules, all firms must submit an accounts certificate to the Society, regardless of whether the firm operates a client bank account.

Firms licensed to carry out incidental financial business must also submit an incidental financial business compliance certificate at the same time as the accounts certificate.

All certificates are reviewed by the Society. Any errors, omissions or breaches noted will be followed up by the Financial Compliance Department, which will seek clarification and offer advice.

Form of certificate

Client funds

Firms that have held client funds during the accounting period must fill in the schedule 1 accounts certificate. The purpose of the certificate is to:

confirm that the firm holds the necessary financial records
confirm that those records are up to date and balanced
allow firms to disclose any breaches of the accounts rules during that period, following which, advice will be provided by the Society if appropriate
allow the Financial Compliance Department to conduct ongoing risk monitoring

No client funds

Firms that do not hold client money must complete the form of certificate found at either schedule 2a or 2b to the rules, depending on whether the firm submits accounts to the Scottish Legal Aid Board. Again, the purpose of the certificate is to confirm that the firm's records are up to date and that the firm continues not to hold client funds.

Timing of certificate

Firms should set up an accounting period of no more than six months from the start of a new practice. The first certificate must be submitted within one month of the end of that accounting period. Subsequent certificates should cover consecutive periods of no more than six months, without gaps or overlaps. Should the firm wish to change the dates of its accounting periods, it should submit a 'short' certificate up to the new period end date, and then resume submission on a six-monthly basis.

Firms with more than one place of business

If a firm operates separate accounting systems for each branch, or has more than one set of accounting records, a certificate must be provided for each. All of the firm's systems or sets of accounts should have the same accounting period end date.

Completing the accounts certificate

Again, accounts certificates must cover a period of no more than six months and should not overlap any dates of previously submitted certificates. All relevant sections must be completed; if there is no information to be entered in a particular section, please state "NONE" to show that the section has not been omitted by accident. Of particular note is the additional matters section of the form of certificate at schedule 1 to the rules.

Where appropriate, the certificate is to be signed by two partners, one being the current designated cashroom partner. The partners must take care to ensure that the figures submitted are correct.

The certificate should be prepared on the firm's headed notepaper and should disclose the following details:

the start and finish dates of the accounting period
the identity of the designated cashroom partner or partners and MLRO
the list of powers of attorney - a separate list can be attached to the certificate if the firm holds a large number of such powers

The following information should be extracted from the accounting records each quarter and disclosed in the additional matters section of the certificate:

total sums due to clients in the general client accounts
total monies held in general client bank accounts
surplus or deficit position resulting from the information above
total reconciled figure for sums due to named clients
total reconciled figure for funds held on behalf of named clients
total of loans for named clients and balances due by named clients
total sum of money due to the firm, ie the sum of all current, savings or deposit accounts in the name of the firm
total sum due by the firm. This includes term loans, practice loans, overdrafts and other borrowings. Hire purchase liabilities that fund partnership assets are included but unexpired leases are not. Personal loans outwith the firm are excluded

If an accountant is instructed to help with the preparation of the certificate, details of the level of assistance given should be included. This is best done by attaching a copy of the letter of engagement between accountant and solicitor.

Dealing with breaches of the accounts rules

The Society appreciates that beaches of the rules do happen from time to time and firms are encouraged to contact the Financial Compliance Department for advice and assistance. If a breach is discovered, the firm should take corrective measures and write to the Society explaining the position. If the problem cannot be corrected immediately, the firm should contact the director of financial compliance or a member of his team for advice.