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Requirements for independent audit of solicitor trust accounts

Requirements for independent audit of solicitor trust accounts

Law practices and approved barristers’ clerks who operate trust accounts are required to keep accurate records. These records must be examined by an external examiner each trust examination year.

Unlike income tax year, solicitor trust accounts are required to report to the year ended March 31, and solicitors must make sure that trust accounts are audited within the stipulated period each year.

The trust examination year runs from April 1 to March 31, and reporting must be lodged no later than May 31 each year by the external examiner.

What is a solicitor’s trust account audit?

Lawyers and barristers who maintain trust accounts to handle trust money on behalf of their clients need to undergo an annual audit of their trust accounts.

An external examiner is required to audit the trust accounts and determine whether the law practice during the time of examination has complied with the relevant legislation, regulations and any legal rules relating to how the law practices handling trust money.

This includes obtaining evidence that the trust accounting and other trust records have been properly kept; that there is no loss or deficiency of trust funds or failure to pay or account for trust funds; and that there has been no failure to comply with legal acts or regulations.

Requirements for solicitor’s trust account annual audit

In Victoria, solicitors must comply with the rules under the Legal Profession Uniform Law 2015, but each state in Australia must refer to their relevant state law for rules set for their regions.

Organising and appointing an external examiner to audit the trust accounts is the responsibility of the solicitor. The cost of the trust account audit must be paid for by the solicitor, however it must be paid from the solicitor’s general account and not from the trust account.

The external examiner must be given access to accounting records for the trust account, as well as the records and files of the solicitor’s practice. Therefore, solicitors must ensure that all transactions involving money in the trust account have been documented accurately.

Some examples of supporting documents which should be available for auditing include cash receipts, cash payment register, cheque requisition form for withdrawals, trust transfer journals, bank statements, bank deposit slips, EFT records, documents detailing any investment trust accounts, controlled money accounts, and any other supporting documentation required for the audit process.

The deadlines for the external examiner to conduct the annual audit must be met. The Law Practice is responsible to lodge Parts A and B no later than April 30 each year.

Tips for undergoing the solicitor’s trust account audit

It’s important for solicitors to ensure that recording keeping for all trust accounts are well maintained.

Here are some tips to stay on track:

  • Ensure you meet the audit deadlines. The time frames are strict for reporting so ensure you meet the requirements. The trust examination year runs from April 1 to March 31, and reporting must be lodged no later than May 31 each year by the external examiner.
  • Abide by the rules. Ensure the rules prescribed by the law are followed for every trust account and its transactions.
  • Protect documents. Ensure all documentation relating to the trust accounts are kept safe and easily accessible for the annual audit. Also have a secure backup of the data.
  • When in doubt, contact the authority. If you are confused about any aspect of record keeping or the audit process or if you are unsure about any transitions relating to the trust account, contact the authority to seek clarification.

Contact LDB’s audit experts for advice

Navigating audit processes can be complex, and legal requirements are changing frequently.

LDB Group’s team of audit experts can advise on the best way to tackle these trust audits and can offer guidance when needed.

In addition to the audit of trust accounts, our team can also help businesses prepare for a financial audit and review an audit. An LDB director-initiated audit can also give your business the edge it needs.

To find out more about our auditing service, phone (03) 9875 2900 or send us details via the contact form below.

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