As a lawyer, you probably already know that your firm’s trust accounts need to be audited each year, even if you’re a sole trader. Since lawyers keep client’s money in trust and handle it on their behalf, attorney trust accounts are vulnerable to misuse and fraudulent activities, making an audit essential.
When auditing attorney trust accounts, auditors need to follow the detailed audit approach and procedures as set out by the Independent Regulatory Board for Auditors (IRBA) in their ‘Guide for Engagements on Attorneys Trust Accounts’. This guide combines standard audit procedures with the rules and regulations of the Provincial Law Societies and the Attorneys Act 53 of 1979. Apart from confirming compliance with the relevant acts and regulations, the audit also focuses on early detection of fraud and other irregularities.
Basic Trust Account Rules That Attorneys Need to Follow
As a reminder, here are a few rules that lawyers need to keep in mind regarding their clients’ trust accounts:
- Trust money should be kept separate from business money
- Detailed files with all supporting documents should be kept
- Senior personnel should authorise all transactions and journals
- Good internal controls should be established, and accounts should be brought up-to-date on a monthly basis
- There should be segregation of duties
- All trust money should be deposited on the date it was received or on the first business day thereafter
- A list of trust creditors should be compiled every three months as a minimum and compared to the total trust funds held
Here is a list of the most important dates and periods to keep in mind:
- The attorney trust audit report needs to be submitted to the Law Society six months after the financial year end
- For a new law firm, an audit report covering the first four months of operations needs to be submitted within six months
- All interest on trust money should be paid over to the Law Society on a monthly basis
- An unqualified audit report is required to receive a Fidelity Fund certificate from the Law Society
- The Fidelity Fund certificate is valid for a year
Though these are the most important rules and dates, the list is by no means exhaustive. If you need any help ensuring you follow relevant standards and regulations, or you need advice when setting up your trust accounts for the first time, feel free to contact Contador Accountants for direction.
What to look for in an Attorney Trust Auditor
All auditors must meet minimum professional standards to perform audits, such as honesty, integrity, and independence. But since attorney trust audits are more complicated and higher risk, you may want to look for auditors with these additional attributes:
1. Specialising in Attorney Trust Audits
Attorney trust audits are different from other audits, and auditors require an understanding of the unique risks of fraud and theft, as well as an intimate knowledge of the relevant acts, rules, and regulations governing attorney trust accounts. An auditor who specialises in attorney trust audits will have a deeper understanding of your business and can assist you with your Fidelity Fund certificate applications as well as the submission of interest reports to the Law Society.
2. Experienced with Attorney Trust Audits
An auditor who is experienced in performing attorney trust audits knows which questions to ask first time round, which saves you a lot of time and headache. You won’t need to explain the unique transactions or how a trust account works. Also, consider hiring a firm that appoints a strong team with experienced senior members who can provide proper oversight and guidance for any junior members of the team.
3. An Understanding of Legal-Specific Accounting Software
An auditor that suggests that you use Pastel or Quickbooks to account for your attorney trust transactions, does not have experience with attorney trust audits – legal-specific accounting software is non-negotiable. These accounting packages are sometimes difficult to understand, so make sure you choose a firm who already knows the workings of these packages.
4. Keeping up to Date with Changes
Every year, new changes or additions are added to the list of audit procedures and approach as set out by IRBA, as well as changes requested by the Law Society. When looking for an auditor, make sure you choose someone who keeps abreast with changes and attends seminars and courses on a regular basis.
5. Continuity of the Audit Team
You’re busy – the last thing you need is to explain everything to new staff members each year. An audit firm that uses the same team, or at least employs regular senior staff members on your audit engagement each year, will not interrupt your time unnecessarily.
6. Transparency and Communication
You deserve to know what to expect from an attorney trust audit and to get regular updates on the progress of the engagement. An audit firm that describes the processes they follow, is clear about what your accounting team needs to prepare before and during the audit, and who keeps communication open and clear may be an excellent choice for you.
Are You Looking for a New Auditor for Your Attorney Trust Audit?
Choosing an attorney trust auditor is an important decision. You want to get an in-depth audit with the least amount of effort to yourself. You also want the audit to be finalised within six months after year end so that you can get your Fidelity Fund certificate in time.
Contador Accountants specialise in attorney trust audits. We have a strong team of senior auditors, with more than 28 years of experience between them, that perform all audits. Apart from our own research, we also attend courses and seminars each year to keep abreast of any changes.
For additional information on our attorney trust audit services, or if you want to see who our skilled auditors are, get in touch with us now.