The Compliance Conundrum Quiz

The Compliance Conundrum Quiz is a compliance quiz consisting of 50 randomly generated questions that are populated automatically, each day. There is a time limit of 1 hour and the quiz will automatically finalise and submit when the time runs out.

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EVENTS

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#1. Withdrawals from the client bank account are recorded to the client cash book as:

Debits

Credits

#2. The practice-wide risk assessment will be required by the SRA as one of the most important pieces of documentation in relation to AML. It is a living document and should be updated:

Every six months

On an annual basis

Every 1 - 2 years

As often as necessary

#3. As soon as there is no longer a proper reason to hold client money, it must be returned to the client or third party for whom the money is held:

Within 14 calendar days

Within 3 months

Promptly in accordance with the firms client money retention policy

Within 6 months

#4. The MLRO will receive internal suspicious activity reports and then make their report, if necessary, to:

The Serious Organised Crime Office (SOCA)

The Serious Fraud Office (SFO)

Action Fraud

The National Crime Agency (NCA)

#5. A ‘Disbursement for VAT Purposes’ is:

A payment you make on behalf of a client as agent

An office overhead not charged to the client

A cost a business incurs in the course of providing its own services to clients which is usually passed on as an additional fee

An indirect cost

#6. A fee earner has issued a VAT invoice to a client and sent it via email. They have also sent a physical copy in the post.

Is this permissible?

Yes

#7. Your firm is acting for a client and has instructed a process server to serve legal documents to a third party.

When including the cost of the process server in your bill of costs, you treat it as a:

Disbursement for VAT purposes

Recharge

#8. I no longer need to consider time frames when transferring costs (fees and disbursements) to the business account?

True

False

#9. The interest received on for money held in a business account is:

Standard Rated (20%)

Zero Rated (5%)

Exempt

Outside the Scope of VAT

#10. A ‘Statement of Costs On Account’ bill is:

A series of solicitors’ bills which are initially treated as requests for payments on account, but which collectively become a single statute bill upon delivery of a final bill

Solicitors’ bills that do not comply with the requirements of section 69 of the Solicitors Act 1974 constitute statements on account of costs or demands for payments on account of costs

Final statute bills or interim statute bills for the period which they cover or in respect of the engagement itself

An invoice which states only the amount of the total charge and does not provide a detailed breakdown of the work which it covers

#11. I no longer need to consider time frames when transferring costs (fees and disbursements) to the business account?

True

False

#12. Money received from the Legal Aid Agency on account of disbursements that are not yet incurred or paid is?

Client Money

Business Money

#13. You’ve been instructed by a parent company to act for a subsidiary. The parent company belongs in the UK. The subsidiary belongs in France. You need to issue a VAT invoice for £10,000.

Who do you address your VAT invoice to and what VAT rate do you apply?

The parent company with 20% VAT

The parent company as Outside the Scope of UK VAT

The subsidiary with 20% VAT

The subsidiary as Outside the Scope of UK VAT

#14. Under the Proceeds of Crime Act and the Money Laundering Regulations all regulated businesses must have a nominated officer or MLRO. What do the initials MLRO stand for

Money Laundering Recording Officer

Money Laundering Reporting Officer

Money Laundering Receiving Officer

Money Laundering Regulations Officer

#15. You operate various client’s own accounts. SRA Accounts Rule 10 appears to require you to carry out a bank reconciliation for these accounts.

Are you required to prepare a three way bank reconciliation every 5 weeks if you can’t obtain bank statements from the bank or building society?

Yes

#16. A ‘Recharge’ is:

A payment you make on behalf of a client

An office overhead not charged to the client

A cost a business incurs in the course of providing its own services to clients which is usually passed on as an additional fee

An indirect cost

#17. A client bank account must contain the word ‘Client’ within the account name?

True

False

#18. Section 18 of the Legal Sector Affinity Group (LSAG) guidance covers red flags and warning signs for us to look out for regarding AML and CTF. If we have red flags and warning signs come up we are not allowed to take on the client:

True

False

#19. You are acting for a client whose place of belonging is Guernsey and they are making a claim through the UK courts against a water provider for damages on a London property arising from water ingress which the client claims the provider is liable for.

When issuing a bill to the client, what VAT rate do you apply to your supply?

Standard Rated (20%)

Zero Rated (0%)

Exempt

Outside the Scope of UK VAT

Outside the Scope of VAT

#20. You receive an invoice from an overseas supplier for £100 (without VAT) but you would have been charged £20.00 VAT if you’d used a UK supplier.

What figures would you need to put on your VAT return and in what boxes would you put them?

£100 (net value) in box 7 only

£20 (input VAT) in box 4 only

£20 (input VAT) in box 4 and £100 (net value) in box 7

£20 (output VAT) in box 1, £20 (input VAT) in box 4, £100 (net value) in box 6, £100 (net value) in box 7

#21. What is the name given to VAT that you reclaim on your purchases?

Output VAT

Input VAT

#22. Your firm is acting for a client and has instructed a translator to translate a document which needs to be produced in Court.

When including the cost of the translator in your bill of costs, you treat it as a:

Disbursement

Recharge

#23. Double-entry bookkeeping refers to:

The practice of keeping manual and computerised accounting records

Backing up electronic accounting records regularly

The accounting principle that every debit must have a corresponding credit

#24. When does the Accountants Report (AR1) need to be sent to the SRA?

When the report is qualified

All reports should be sent to the SRA

Reports should be sent at the COFAs discretion

When firms hold client money

#25. A court fee has been paid from the business account, what VAT rate do you analyse the payment to when posting to the accounts system?

Zero Rated

Exempt

20%

Outside the Scope of VAT

#26. Normal VAT Tax Point (time of supply) rules apply to Legal Aid work?

True

False

#27. Payments made out of the client bank account are recorded to the client cash book as:

Debits

Credits

#28. Is it permissible to issue the client with a bill of costs for an unpaid, not yet incurred, disbursement?

Yes

#29. The Sales Ledger Control Account (Debtors) is:

A liability

An asset

An expense

#30. In a contentious case, the VAT tax point will be the date of the invoice, provided the invoice is issued within how long after the work is completed?

14 Days

30 Days

2 Months

3 Months

#31. Emotional Intelligence means:

Understanding the need to think positively and be happy at all times

Being aware of your emotions and understanding how to handle others

Removing emotion from thew workplace

Knowing when its appropriate to display an emotion

#32. The interest received on general client account is:

Client Money

Business Money

#33. What is the definition of disbursement within the SRA Glossary?

Means your own charges or profit costs (including any VAT element)

Means your fees and disbursements

Means any costs or expenses paid or to be paid to a third party on behalf of the client or trust (including any VAT element) save for office expenses such as postage and courier fees

Anything that debits the office side of the client's ledger

#34. There is a difference between profit and cash because:

There should never be a difference between cash and profit, unless an error has been made

Business owners take cash out of businesses all the time, without thinking about how much profit has been made

Profit is calculated based on transactions carried out by the business in a specific period, not based on actual cash expended or collected in that period

#35. The bank has charged you for sending funds electronically. It is agreed with the client that the cost charged by the bank will be passed on to the client. You are NOT charging the client an administration fee for sending the payment.

How should this cost be shown on the bill to the client?

Disbursement no VAT

Disbursement with VAT

Recharge no VAT

Recharge plus VAT

#36. Under the SRA Accounts Rules, are you required to obtain the client’s approval prior to transferring costs to the business account?

Yes

#37. What kind of check focuses on where the specific money being used in a transaction came from, such as a loan or gift?

Source of funds

Source of wealth

#38. True or false: the SRA Accounts Rules set out certain requirements for law firm financial statements, such as how client account should be treated on a balance sheet

True

False

#39. If client money is legitimately retained for a specified reason, are you required to regularly update the client?

Yes

#40. On the day of an SRA AML visit the SRA will look at selected matters. How many files will they ask to review?

Unlimited number of files

#41. When dealing with residual balances, instead of recording the payment to the charity from the client’s ledger, your firm moves the residual balance to a ledger in the name of the charity. The payment is then recorded and made from that ledger every six months.

Is this a breach of the SRA Accounts Rules?

Yes

#42. Which one of the following statements is true?

The legal practice is often referred to as the "escrow agent'

An escrow account is a contractual agreement where a third party holds money in accordance with the terms of an escrow agreement

An escrow account can only be used by legal practices

An escrow account is an alternative means of providing banking facilities

#43. The ‘Balance Sheet Test’ is when?

A firm's current liabilities outweighs its current assets

A firm's total liabilities outweighs its current assets

A firm's current assets outweighs its current liabilities

A firm's total liabilities outweighs its total assets

#44. You’re acting for VAT registered business client in a litigation matter. Your services were provided to and used by your client. A third party has agreed to pay your client’s legal costs and you have issued the payer with a note of your costs requesting the full amount. The payer has stated that they’re liable for the net amount only and that your client should discharge the VAT amount.

Is the payer correct?

Yes

#45. Your firm acted for a client in the sale of commercial premises which is now completed. Your firm are in the process of accounting to him for the net proceeds of sale. Independently of this retainer, the client’s daughter has instructed another solicitor in your firm to act for her in buying a flat.

The father has asked the firm to retain enough money to cover his daughter’s legal fees and to send the balance to him.

Is this providing banking facilities?

Yes

#46. Firms are allowed to pay residual balances to a charity of the firm’s choice provided the firm complies with the SRA’s prescribed circumstances.

They do not need to make an application to the SRA if the balance is:

£30 or less

£50 or less

£250 or less

£500 or less

#47. You have paid a disbursement from the business account and now have sufficient money held in the client account towards it.

Are you required to send the client a bill or other written notification of costs prior to transferring the money from the client account to the business account?

Yes

#48. What does MLRO stand for?

Money Laundering Reporting Officer

Money Laundering Recording Officer

Means Legalising Recording Officer

Means Legal Recording Official

#49. The maximum fine the SRA can impose on a firm for AML failures and breaches of the MLR2017 is £25,000:

True

False

#50. You instruct a medical reporting agency to obtain copy-medico legal documents on behalf of a client that has been involved in a road traffic accident.

Is this cost a disbursement for VAT purposes or a recharge?

Disbursement

Recharge

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The Compliance Conundrum Quiz

Results

#1. Withdrawals from the client bank account are recorded to the client cash book as:

#2. The practice-wide risk assessment will be required by the SRA as one of the most important pieces of documentation in relation to AML. It is a living document and should be updated:

#3. As soon as there is no longer a proper reason to hold client money, it must be returned to the client or third party for whom the money is held:

#4. The MLRO will receive internal suspicious activity reports and then make their report, if necessary, to:

#5. A ‘Disbursement for VAT Purposes’ is:

#6. A fee earner has issued a VAT invoice to a client and sent it via email. They have also sent a physical copy in the post.Is this permissible?

#7. Your firm is acting for a client and has instructed a process server to serve legal documents to a third party.When including the cost of the process server in your bill of costs, you treat it as a:

#8. I no longer need to consider time frames when transferring costs (fees and disbursements) to the business account?

#9. The interest received on for money held in a business account is:

#10. A ‘Statement of Costs On Account’ bill is:

#11. I no longer need to consider time frames when transferring costs (fees and disbursements) to the business account?

#12. Money received from the Legal Aid Agency on account of disbursements that are not yet incurred or paid is?

#13. You’ve been instructed by a parent company to act for a subsidiary. The parent company belongs in the UK. The subsidiary belongs in France. You need to issue a VAT invoice for £10,000.Who do you address your VAT invoice to and what VAT rate do you apply?

#14. Under the Proceeds of Crime Act and the Money Laundering Regulations all regulated businesses must have a nominated officer or MLRO. What do the initials MLRO stand for

#15. You operate various client’s own accounts. SRA Accounts Rule 10 appears to require you to carry out a bank reconciliation for these accounts. Are you required to prepare a three way bank reconciliation every 5 weeks if you can’t obtain bank statements from the bank or building society?

#16. A ‘Recharge’ is:

#17. A client bank account must contain the word ‘Client’ within the account name?

#18. Section 18 of the Legal Sector Affinity Group (LSAG) guidance covers red flags and warning signs for us to look out for regarding AML and CTF. If we have red flags and warning signs come up we are not allowed to take on the client:

#20. You receive an invoice from an overseas supplier for £100 (without VAT) but you would have been charged £20.00 VAT if you’d used a UK supplier.What figures would you need to put on your VAT return and in what boxes would you put them?

#21. What is the name given to VAT that you reclaim on your purchases?

#22. Your firm is acting for a client and has instructed a translator to translate a document which needs to be produced in Court.When including the cost of the translator in your bill of costs, you treat it as a:

#23. Double-entry bookkeeping refers to:

#24. When does the Accountants Report (AR1) need to be sent to the SRA?

#25. A court fee has been paid from the business account, what VAT rate do you analyse the payment to when posting to the accounts system?

#26. Normal VAT Tax Point (time of supply) rules apply to Legal Aid work?

#27. Payments made out of the client bank account are recorded to the client cash book as:

#28. Is it permissible to issue the client with a bill of costs for an unpaid, not yet incurred, disbursement?

#29. The Sales Ledger Control Account (Debtors) is:

#30. In a contentious case, the VAT tax point will be the date of the invoice, provided the invoice is issued within how long after the work is completed?

#31. Emotional Intelligence means:

#32. The interest received on general client account is:

#33. What is the definition of disbursement within the SRA Glossary?

#34. There is a difference between profit and cash because:

#35. The bank has charged you for sending funds electronically. It is agreed with the client that the cost charged by the bank will be passed on to the client. You are NOT charging the client an administration fee for sending the payment.How should this cost be shown on the bill to the client?

#36. Under the SRA Accounts Rules, are you required to obtain the client’s approval prior to transferring costs to the business account?

#37. What kind of check focuses on where the specific money being used in a transaction came from, such as a loan or gift?

#38. True or false: the SRA Accounts Rules set out certain requirements for law firm financial statements, such as how client account should be treated on a balance sheet

#39. If client money is legitimately retained for a specified reason, are you required to regularly update the client?

#40. On the day of an SRA AML visit the SRA will look at selected matters. How many files will they ask to review?

#42. Which one of the following statements is true?

#43. The ‘Balance Sheet Test’ is when?

#46. Firms are allowed to pay residual balances to a charity of the firm’s choice provided the firm complies with the SRA’s prescribed circumstances.They do not need to make an application to the SRA if the balance is:

#47. You have paid a disbursement from the business account and now have sufficient money held in the client account towards it.Are you required to send the client a bill or other written notification of costs prior to transferring the money from the client account to the business account?

#48. What does MLRO stand for?

#49. The maximum fine the SRA can impose on a firm for AML failures and breaches of the MLR2017 is £25,000:

#50. You instruct a medical reporting agency to obtain copy-medico legal documents on behalf of a client that has been involved in a road traffic accident.Is this cost a disbursement for VAT purposes or a recharge?

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#6. A fee earner has issued a VAT invoice to a client and sent it via email. They have also sent a physical copy in the post.

Is this permissible?

#7. Your firm is acting for a client and has instructed a process server to serve legal documents to a third party.

When including the cost of the process server in your bill of costs, you treat it as a:

#13. You’ve been instructed by a parent company to act for a subsidiary. The parent company belongs in the UK. The subsidiary belongs in France. You need to issue a VAT invoice for £10,000.

Who do you address your VAT invoice to and what VAT rate do you apply?

#15. You operate various client’s own accounts. SRA Accounts Rule 10 appears to require you to carry out a bank reconciliation for these accounts.

Are you required to prepare a three way bank reconciliation every 5 weeks if you can’t obtain bank statements from the bank or building society?

#20. You receive an invoice from an overseas supplier for £100 (without VAT) but you would have been charged £20.00 VAT if you’d used a UK supplier.

What figures would you need to put on your VAT return and in what boxes would you put them?

#22. Your firm is acting for a client and has instructed a translator to translate a document which needs to be produced in Court.

When including the cost of the translator in your bill of costs, you treat it as a:

#35. The bank has charged you for sending funds electronically. It is agreed with the client that the cost charged by the bank will be passed on to the client. You are NOT charging the client an administration fee for sending the payment.

How should this cost be shown on the bill to the client?

#46. Firms are allowed to pay residual balances to a charity of the firm’s choice provided the firm complies with the SRA’s prescribed circumstances.

They do not need to make an application to the SRA if the balance is:

#47. You have paid a disbursement from the business account and now have sufficient money held in the client account towards it.

Are you required to send the client a bill or other written notification of costs prior to transferring the money from the client account to the business account?

#50. You instruct a medical reporting agency to obtain copy-medico legal documents on behalf of a client that has been involved in a road traffic accident.

Is this cost a disbursement for VAT purposes or a recharge?