Inspections and investigations

Deadline for historical client balances

Introduction

Our inspection video will give you an introduction on what to expect if an inspector calls to your firm.

Background

Rule 19 of the Solicitors (Scotland) Accounts etc Rules 2001 authorises the Society to carry out inspections and investigations into the books, records and conduct of law firms in Scotland. This function is delegated to the Financial Compliance Department.

  • to assess compliance with the accounts rules
  • to identify risks to the profession and public arising from non-compliance with the accounts rules, and to assist firms in dealing with these
  • to provide assurance to the profession and the public that the Society is protecting their interests by reducing risk through early intervention, where there are conduct and compliance issues
  • to advise firms on their systems and procedures, in order to achieve compliance and meet best practice targets
  • to ensure the advice and guidance issued to the profession deals with current issues

Generally, firms will be notified in advance of our intention to inspect their books and records. This allows firms to ensure the availability of staff and accounting information, as well as deal with office logistics. Firms will normally receive two weeks' notice, although the rule only requires that 48 hours' written notice be given.

In certain circumstances, the Council has the power to authorise a wider investigation into the conduct of the firm and the solicitor, and, if urgent action is required, to dispense with the requirement of notice altogether.

Inspection process

Before the inspection

Prior to the inspection, firms will be asked to complete a pre-visit questionnaire. This information allows for more efficient planning of the inspection and helps the team understand the issues affecting the firm.

Our visit

During the inspection, a series of checks will be performed to verify the accuracy of the firm's accounting information. The firm's systems and procedures will also be assessed and a small sample of files selected for review. This information will allow the compliance team to identify any specific breaches and areas for development.

As part of the inspection, the team will assess compliance with the Client Communication Practice Rules 2005 and, if the firm is licensed to carry out incidental financial business, the Incidental Financial Business Practice Rules 2004.

The inspection will usually conclude with a meeting between the designated cashroom partner and the compliance team, at which the firm will be advised of the team's findings. This is a useful opportunity for both parties to seek clarification, for the firm to provide comment at an early stage and for the team to offer advice.

Correspondence

In most instances, further information will be requested by letter following the inspection. The correspondence process allows the firm to seek further guidance on accounts rules breaches and to reassure the Society that any underlying issues have been addressed.

Client Protection Sub-Committee

Occasionally, it will be necessary to refer the inspection report and subsequent correspondence to the Client Protection Sub-Committee for review. Firms will usually be advised of this step and we encourage firms to provide as much of the requested information as possible prior to the committee meeting.

The committee has a number of options available to it in the event that further action is required. For example, the committee may decide that an early re-inspection is justified or that it is appropriate to invite the partners to attend an interview meeting. The committee may also decide to pursue a complaint. Firms will be advised of the committee's decision in writing following the meeting.

Feedback

We welcome feedback from firms following an inspection and each firm is given the opportunity to complete the department's feedback form. While the feedback is generally positive, we will contact firms to discuss any significant improvement opportunities identified during the feedback process.

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