A solicitor trust account audit is an annual review by an external examiner to ensure that a law practice’s trust accounts comply with relevant legislation and regulations. Solicitors maintain trust accounts to handle money on behalf of their clients, and these accounts must be accurately documented and managed.

• The audit involves checking that:
• Trust accounting records are properly kept.
• There is no loss or deficiency of trust funds.

All legal rules and regulations regarding the handling of trust money are followed.

The relevant state-based legislation mandates solicitor trust account audits. Each state also has a regulatory body that ensures that solicitors comply with the applicable legislation and maintain the integrity of their trust accounts through regular audits.

Solicitor trust account audits are mandated by the relevant state-based legislation. While individual firms may differ the usual year ends and audit due dates are outlined below.

Solicitor trust account audits must be performed by an external examiner who meets specific qualifications and is approved by the relevant regulatory body in each state or territory.

RSM has a number of approved external examiners across the relevant states and territories. 

Preparing for a solicitor trust account audit involves several key steps to ensure compliance and smooth auditing. Here are some essential tips:

• Maintain Accurate Records: Ensure all trust account records are up-to-date and accurately reflect all transactions.
• Internal Reviews: Conduct regular internal audits to identify and rectify any discrepancies before the external audit. This helps in maintaining ongoing compliance.
• Reconcile Accounts: Regularly reconcile trust accounts to ensure that the balances match the records. This includes reconciling client ledgers with bank statements in the required timeframes.
• Organise Documentation: Keep all trust documents well-organised and easily accessible. This includes transaction records, receipts, payments, and any correspondence related to trust account transactions.
• Compliance Checklists: Consider using compliance checklists to ensure all regulatory requirements are met each month.
• Training Staff: Ensure that all staff handling trust accounts are well-trained in compliance requirements and understand the importance of accurate record-keeping.
• Use Approved Software: Implement robust accounting software that complies with legal standards and provides real-time compliance monitoring.
• Secure Records: With more firms moving to cloud-based systems ensure that all documentation related to trust accounts is appropriately protected and ensure they are kept safe and secure for the relevant periods of time. 

For a solicitor trust account audit, your examiner can request any documentation under the relevant legislation. Standard documents that your examiner may ask for include:

• Statement of trust money
• Trust account bank statements
• Trust account bank reconciliation
• Statutory deposit account records (if applicable)
• Controlled money receipts and payment records
• Controlled money bank statements
• Controlled money registers
• Cash receipts and cash payment reports
• Trust ledgers
• Trust receipts
• Duplicate deposit slips
• Trust payments, including by both cheque and electronic funds transfers
• Investment money registers and accounts
• Trust transfer journals reports
• Trust journals
• Transit money registers
• Dormant balances listings with reasoning for aged matters
• Register of powers and estates
• Register of trust money subject to a specific power
• Register of financial interests
• Register of safe custody documents
• Register of open files
• Deficiencies reported to regulatory bodies
• Any other relevant documents that support the transactions in the trust account.

After our initial planning meeting with management, we provide a schedule of audit document requests required for the solicitor trust account audit and lock in audit dates.  

Our solicitor trust account audits are often completed with a hybrid working arrangement, combining on-site and remote visits to minimise disruption to our clients. Where information is required electronically, we utilise our secure iManage

Share platform, which helps to facilitate the efficient transfer of information, including the ability to upload large files at high speeds. 

A solicitor trust account audit is a compliance audit that focuses specifically on the compliance of the trust records, whereas a financial statement audit examines an organisation’s overall financial health and practices of an organisation.