When we last met Alison, she was living every COFA’s quiet fear: a reconciliation pack that looked neat and reconciled, until the reporting accountant drilled into it and it didn’t reconcile at all. The pack relied on adjustments that weren’t supported, balances had been carried forward without resolution, and some transfers were recorded in the ledger in a way that didn’t match the bank position at the time. The result was a qualified accountant’s report and a self-report to the SRA.
This follow-on piece is the practical bit – what Alison needed in her toolkit before she started signing those reconciliation packs.
As a COFA, delegating the work is sensible. Delegating the understanding is the trap.
A reconciliation can “balance” and still be wrong
Most legal accounts systems will produce a reconciliation that “balances”. That is not the same thing as a reconciliation you can stand behind.
A good monthly sign-off starts with one simple discipline: do you understand where each number came from, and can you evidence that you checked it back to source documentation? If you can’t, you’re signing a document you don’t really own.
The three-way reconciliation is a snapshot
A proper client account reconciliation is a snapshot at a single point in time. It must include:
- the client bank balance
- the client matter listing
- the client account cashbook
And it is vital that the same date is used for each of those three components. If the dates don’t match, you’re comparing different moments in time. The pack can be made to “agree” without telling you the truth.
This one point alone would have protected Alison from a lot of false comfort, because it forces you to ask: “What exactly are we measuring, and at what moment?”
Reconciling is not “admin”
Reconciling items are the things that explain the difference between the firm’s records and the bank statement at the reconciliation date.
Typical examples include unpresented cheques and uncredited lodgements.
Unpresented cheques
Yes, the money is still sitting in client account, which feels reassuring. But the age of the cheque matters.
- If it’s over six months old, it can’t be presented and needs to be written back and reissued.
- If it’s over three months old, it deserves active investigation (right address? right payee? has it been lost? is the underlying matter actually concluded?).
Left alone, these can drift into residual balance territory, and the trail gets colder as files are archived and people move on.
Uncredited lodgements
These should usually clear shortly after month end (for example, you bank a cheque at the end of February and it appears on the statement in early March). If they don’t clear, or if you’re seeing entries that should clear instantly sitting as “uncredited”, that’s something you need to challenge.
Adjusting items are a high-risk category (and can disguise the true position)
Adjusting items are payments or receipts that have gone through the bank but have not been entered into the accounting records.
Sometimes they are innocent and exactly why reconciliations exist (for example, money arrives unexpectedly and you need to allocate it to the correct client ledger).
But adjusting items can also be used (deliberately or accidentally) to make a reconciliation “balance” while hiding a breach.
The classic scenario is where a payment has gone out through the bank, but the accounting records haven’t been updated. In some systems, postings that would create an overdrawn client ledger are blocked. So the bank position is worse than the ledger position, and the “fix” becomes an adjusting entry that makes the reconciliation look tidy while the underlying shortage is concealed.
For every adjusting item, the standard should be:
- a full explanation
- checking back to source documentation
- understanding the impact on the relevant client ledger
- documented actions and follow-up
- record it in the breaches register if required
And you should treat this as a forensic exercise, because it is one of the easiest areas for the true level of client funds to be manipulated or misunderstood.
Your matter listing is a diagnostic tool
COFAs often focus on whether the total figures tally. But the matter listing is where issues jump out if you know what you’re looking for.
Examples of things that should make you pause include:
- debits on client account (potential overpayments/shortages depending on the wider picture)
- credits on office account (why is office in credit?)
- slow-moving/residual balances
- suspense/miscellaneous ledgers
- accounts in the name of the firm or managers/partners
The key is that you must be able to access the full listing (not just a summary) and use it to ask better questions.
Don’t fall into the “clean accountant’s report” trap
One of the themes we see (and that sits right underneath Alison’s story) is COFAs relying on the reporting accountant to catch issues.
That’s risky. Firms can receive a “clean bill of health” even where there are significant issues stemming from the accounts and reconciliations. A clean report is reassuring, but it is not a substitute for monthly understanding and oversight.
COFA sign-off best practice
Your reconciliation sign-off should produce an audit trail. There should be a “pack” that shows:
- the three components (bank, matter listing, cashbook) for the same date
- evidence you’ve checked key figures back to source documentation
- a clear schedule of reconciling and adjusting items, with explanations
- actions allocated and diarised (and confirmation that old items are being cleared)
- notes of the questions you asked and the answers you relied on
This is important because if the reporting accountant asks, or the SRA visits, you want the file to answer the question before you even open your mouth: what were you doing as COFA?
If you don’t want to be Alison, this is exactly what we will address on our COFA Masterclass on 25th March 2026. This is a full day event in Central London. It’s a small group session so spaces are limited.
