Survey reveals that a large number of senior lawyers believe that firms manipulate published profit figures

Leading lawyers believe that law firms often massage their financial performance figures, according to a poll that shows that nearly 40% of partners think firms routinely inflate published profit figures.

In the latest Legal Week/ EJ Legal Big Question survey of more than 100 leading partners, 37% of respondents said that most law firms ‘massage’ their reported results for turnover and profits per partner.

An additional 30% believed there was a ‘50/50’ split between those firms that provide accurate figures and those that manipulate their results, compared to 31% who felt that ‘most’ published results are accurate.

One property partner at a top 50 firm said market forces were behind the trend for firms to release figures, but added that people expected more information about the performance of firms and would speculate if that information was not given.

He agreed that figures were not always an accurate reflection of the actual state of a firm’s practice.

Roy Montague-Jones, head of corporate finance at Richards Butler, told Legal Week: “I am told a lot of firms do [inflate their results].” He added that this was more likely to happen in lean commercial markets.

Opinion was split as to whether the trend for law firms to publish data such as turnover and average annual profits was a good thing. Sixty-eight percent of respondents said it was, against 32% who were not in favour of it.

But despite considerable scepticism over the accuracy of results, the majority of leading lawyers believed that the traditional benchmark of average profits per partner was a ‘useful’ indication of a firm’s performance. A further 18% claimed the measure was ‘very useful’ while 16% argued it was ‘irrelevant’.

Unsurprisingly, commercial law firms remain strongly opposed to any compulsion to publish financial figures with 93% rejecting any requirement for law firms to issue financial results.

However, the growing number of firms that are converting to limited liability partnerships are required to disclose their profits