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. Which document is generally required to reclaim VAT?

A pro forma invoice

A supplier statement

A full VAT invoice meeting the valid VAT invoice requirements

A verbal confirmation from the supplier

#2. 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

#3. When should you conduct a source of funds check?

After the transaction is completed

Only when you receive client money

Early in the client journey, ideally before transactional work begins

#4. The Legal Omsbudsman has the power to award compensation when a client wins their case. What is the highest figure the Legal Ombudsman can award?

£10,000.00

£25,000.00

£50,000.00

£100,000.00

#5. The petty cash tin is another form of business/office bank account?

True

False

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

Debits

Credits

#7. 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

#8. What is the definition of ‘costs’ within the SRA Glossary?

The firm's fees

The firm's disbursements

The firm's fees and disbursements

The firm's fees and VAT

#9. How is the ‘Current Ratio’ (which is sometimes also called Working Capital Ratio) calculated?

Current assets divided by total liabilities

Current assets divided by current liabilities

Current liabilities divided by current assets

#10. 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

#11. You’re acting for client in a land dispute case where the client has taken action against a deceased’s estate to secure title to a property they own. The client’s place of belonging is the USA. The disputed land is the UK. You draft an invoice for £2,000.00. What VAT rate do you apply to your supply?

Zero Rated

Reduced Rate (5%)

Standard Rate (20%)

Exempt

Outside the Scope of VAT

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

A liability

An asset

An expense

#13. What is the key difference between profit and cash?

Profit includes only bank transactions

Cash includes accruals and prepayments

Profit is based on accounting rules; cash reflects actual money received and paid

There is no difference

#14. Your firm is acting for a client. The case is a criminal matter. The fee earner instructs a specialist to produce video copies of CCTV footage where the action is slowed down, hard copies of individual frames and enhanced/enlarged sections of images are produced. The cost of this service is being passed on to the client.

When billed, the cost is a:

Disbursement

Recharge

#15. When dealing with residual balances that are £500 or less that are to be paid to a charity, your firm posts a journal from the business side of the client’s ledger and credits a nominal ledger in the name of the charity. You then transfer the residual balance from the client account to the business account.

Once a month, the payment to the charity is made from the charity nominal ledger. Is this permissible under the SRA Accounts Rules?

Yes

#16. You’ve pursued a bad debt through the court. The court has awarded you costs and interest. Do you:

Raise a bill and account for the VAT on the costs received only

Raise a bill and account for the VAT on the costs and interest received

Raise a bill and account for the VAT on the interest received only

None of the above

#17. When a client needs to make a complaint about your firm, they must follow the firm’s complaints procedures. If they are not happy with the way the complaint has been dealt with, they will then take it further by going to the Legal Ombudsman (LeO). They must make their complaint to LeO within which time scale after the firm’s final response to them?

Six months

One year

Three years

Five years

#18. 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

#19. Your firm deals with estate matters and you incur and pay for probate court fees. You also pay for additional copies of the grant of probate. These copies are often sent out to third parties in order to speed up process. You pass the cost of the additional copies on to the estate.

How should you show them and treat them on your bill/invoice?

Recharge net cost plus VAT

Recharge net cost with no VAT

Disbursement net cost plus VAT

Disbursement net cost with no VAT

#20. You’re acting for a client in respect of a compromise agreement. The employer has agreed to pay your client’s costs and has asked if you would address your invoice to them?

What would you issue the payer?

A VAT invoice addressed to the payer

A VAT invoice addressed to the client but denoted ‘payable by’ the third party payer

A request for payment (non-VAT invoice) addressed to the payer stating 'This is not a VAT invoice'

#21. Is it permissible to pass on the costs of conducting client due diligence as a disbursement under the AML under the money laundering regulations on to my client?

Yes

#22. What should you request to properly verify a client’s source of funds?

A verbal confirmation of where the money came from

Clear, documented evidence like payslips, bank statements, or sale agreements

Only details of the account where the money is currently held

#23. On the day of an SRA AML visit the SRA will speak to selected fee earners. Usually this will be:

1 Fee Earner

2 Fee Earners

3 Fee Earners

4 Fee Earners

#24. 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

#25. 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

#26. 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

#27. The three principle money laundering offences are found in the Proceeds of Crime Act 2002 (POCA). In which sections can we find these offences:

Section 127, 128 and 129

Section 227, 228 and 229

Section 327, 328 and 329

Section 427, 428 and 429

#28. What is the main benefit of using consistent numbering conventions in the Chart of Accounts?

It increases VAT recovery

It reduces payroll processing time

It improves organisation, reporting, and analysis

It prevents duplicate supplier invoices

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

Yes

#30. 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

#31. 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

#32. When managing bulk disbursements (e.g. Land Registry or HMCTS), what is most important for efficiency?

Posting everything to a suspense account, first

Recording clear references, accurate posting dates, and maintaining proper records

Waiting until year end to allocate costs

Only recording the payment when cash leaves the bank

#33. What is the difference between the Profit and Loss Account and the Balance Sheet?

The Profit and Loss shows the company performance to date; the Balance Sheet provides evidence that the firm’s accounts balance correctly and don’t contain errors

The Profit and Loss shows income and expenditure over a financial period, creating either a profit or loss. Balance Sheet is a snapshot of the company’s overall financial health at a given date

The Profit and Loss contains a history of the firm’s profit/losses over time. Balance Sheet shows the company’s overall performance and proves that company assets are balancing with company liabilities, and so can continue trading

#34. 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

#35. A solicitor from ABC Law is acting for a farmer who is granting Company X with rights to put a wind farm on his land. The solicitor is advising on the contract/lease outlining the rights of the wind farm on the farmers’ land.

After the contract is completed ABC Law receive rental payments into client account each quarter.

Is this providing banking facilities?

Yes

#36. A “qualified” accountant’s report means:

It has been carried out by an accountant who is qualified

Serious breaches were identified and reported to by the accountant

Breaches were not identified

It is a term used to describe very compliant practices

#37. A bill of costs must be signed by a partner/director or member?

True

False

#38. You have instructed an interpreter in order for your client to be able to communicate with you or to enable your client to understand Court proceedings. The cost of the interpreter is being passed on to the client. When billed, the cost is:

A Disbursement

A Recharge

#39. You instruct a third party contractor to represent your client at a police station who has been arrested. The third party issues you with an invoice addressed to your firm with no VAT as they are not VAT registered. You pass this cost on to your client.

How should you show it and treat it on your bill/invoice?

Disbursement net cost plus VAT

Disbursement net cost with no VAT

Recharge net cost plus VAT

Recharge net cost with no VAT

#40. Every law firm, regardless of the type of work they do, must have their complaints handing information on their website or in another format if they don’t have a website.

True

False

#41. Who sets out the key objectives that all regulators must achieve?

The Legal Services Board

The Legal Ombudsmen

The Solicitors Regulation Authority

The Law Society

The Legal Aid Agency?

The Chartered Institute of Legal Executives

#42. If a business expects to spend more than it earns, it becomes known as what?

Cash flow neutral

Cash flow positive

Cash flow rich

Cash flow negative

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

Client Money

Business Money

#44. What is the purpose of an accrual?

To record income received in advance

To recognise an expense in the period it relates to, even if not yet invoiced

To reduce VAT liability

To write off bad debts

#45. The bank has offered you a fixed term, high interest, client account. You would need to place £2 million in the account for a fixed term of 1 year to obtain the rate.

Is this permissible?

Yes

Depends

#46. A ‘Chamberlain’ 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

#47. 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

#48. Which of the following best describes a disbursement?

A general office overhead

A staff entertainment expense

A cost paid on behalf of a client

A director’s travel claim

#49. Your firm prepare a lot of wills and fixed fee interviews as one-off transactions for clients. However, instead of opening an individual client ledger for each client, you have a general ledger on which you record the details of each client and the costs received.

Is this a breach of the SRA Accounts Rules?

Yes

#50. Transparency Rule 4.1 covers the digital badge (sometimes called the clickable logo) which shows any website visitors that your firm is regulated and it gives them a link to the protection that provides. How will a website visitor know if the logo on your website is valid?

It will be at the top of your website page

It will show the current date

It will be purple in colour

The logo will show your SRA number

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The Compliance Conundrum Quiz

Results

#1. Which document is generally required to reclaim VAT?

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

#3. When should you conduct a source of funds check?

#4. The Legal Omsbudsman has the power to award compensation when a client wins their case. What is the highest figure the Legal Ombudsman can award?

#5. The petty cash tin is another form of business/office bank account?

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

#7. 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:

#8. What is the definition of ‘costs’ within the SRA Glossary?

#9. How is the ‘Current Ratio’ (which is sometimes also called Working Capital Ratio) calculated?

#10. 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?

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

#13. What is the key difference between profit and cash?

#16. You’ve pursued a bad debt through the court. The court has awarded you costs and interest. Do you:

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

#20. You’re acting for a client in respect of a compromise agreement. The employer has agreed to pay your client’s costs and has asked if you would address your invoice to them?What would you issue the payer?

#21. Is it permissible to pass on the costs of conducting client due diligence as a disbursement under the AML under the money laundering regulations on to my client?

#22. What should you request to properly verify a client’s source of funds?

#23. On the day of an SRA AML visit the SRA will speak to selected fee earners. Usually this will be:

#24. 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?

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

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

#27. The three principle money laundering offences are found in the Proceeds of Crime Act 2002 (POCA). In which sections can we find these offences:

#28. What is the main benefit of using consistent numbering conventions in the Chart of Accounts?

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

#30. 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?

#31. 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

#32. When managing bulk disbursements (e.g. Land Registry or HMCTS), what is most important for efficiency?

#33. What is the difference between the Profit and Loss Account and the Balance Sheet?

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

#36. A “qualified” accountant’s report means:

#37. A bill of costs must be signed by a partner/director or member?

#38. You have instructed an interpreter in order for your client to be able to communicate with you or to enable your client to understand Court proceedings. The cost of the interpreter is being passed on to the client. When billed, the cost is:

#40. Every law firm, regardless of the type of work they do, must have their complaints handing information on their website or in another format if they don’t have a website.

#41. Who sets out the key objectives that all regulators must achieve?

#42. If a business expects to spend more than it earns, it becomes known as what?

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

#44. What is the purpose of an accrual?

#45. The bank has offered you a fixed term, high interest, client account. You would need to place £2 million in the account for a fixed term of 1 year to obtain the rate.Is this permissible?

#46. A ‘Chamberlain’ bill is:

#47. 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?

#48. Which of the following best describes a disbursement?

#50. Transparency Rule 4.1 covers the digital badge (sometimes called the clickable logo) which shows any website visitors that your firm is regulated and it gives them a link to the protection that provides. How will a website visitor know if the logo on your website is valid?

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#7. 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:

#10. 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?

#20. You’re acting for a client in respect of a compromise agreement. The employer has agreed to pay your client’s costs and has asked if you would address your invoice to them?

What would you issue the payer?

#24. 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?

#30. 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?

#45. The bank has offered you a fixed term, high interest, client account. You would need to place £2 million in the account for a fixed term of 1 year to obtain the rate.

Is this permissible?