Procedures to Ensure A Smooth Law Society Spot Audit

Transcription

1 Procedures to Ensure A Smooth Law Society Spot Audit October 23, 2012 Leslie Vine, MBA Vine & Associates

2 The Law Society of Upper Canada 1

3 LSUC Website Says: Spot Audit supports and promotes high quality law firm record keeping by answering questions and providing guidance regarding private mortgages, trust and general record keeping requirements, and By-Law 9 and providing onsite support and ensuring compliance with LSUC requirements by conducting audits. Let s take advantage of what they have to offer! 2

4 Does It Really Matter? Professionalism Business Reputation Clients LICENSE TO PRACTICE! 3

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6 Trust Accounts 5

7 Trust Accounts Avoid Negative Trust Balances Negative trust balances How do they happen? Handwritten cheques Default setting to Restrict Negative Trust Balances is turned off. DO: Track all trust receipts and trust disbursements in real time. DO: Keep your Restrict Negative Trust Balances turned on. 6

8 Trust Accounts Trust Transfers as a Single Entry Trust-to-general transfers and trust-to-trust transfers $ vs $ The more entries you make, the more opportunity there is for error LSUC expects you to be accurate to the penny DO: Make sure your entries are tracked accurately to the penny. DO: Use PCLaw to create transfers in one transaction. 7

9 Trust Accounts Complete Forms 9A, 9B, 9C What is a Form 9A and what is it used for? 9B? 9C? Don t know about it? Don t think it s necessary? What is the value of these forms? 8

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11 Trust Accounts Complete Forms 9A, 9B, 9C DO: Prepare a Form 9A for each and every trust-to-general transfer. DO: Prepare a Form 9B for each and every withdrawal by Teranet. DO: Prepare a Form 9C for each and every trust transfer for closing funds. 10

12 Trust Accounts No Cheque For Fees What is wrong with this cheque? And what happens when you try to print it? 11

13 Trust Accounts No Cheque For Fees DO: Print your trust cheques out of PCLaw. 12

14 Trust Accounts Don t Create a Miscellaneous File LSUC Bookkeeping Guide says: There should be no trust ledger accounts in your name, your firm name, or any other name such as miscellaneous, suspense, or unknown, that is not a client s name. What does that really mean? DO: Allocate trust fund movement to the correct file in real time. DO: Ban miscellaneous files. They are just code for: I can t be bothered and I don t know. 13

15 Trust Accounts Review Your Balances Regularly What is a Trust Listing? DO: Set up a schedule and review trust balances regularly. Monthly, quarterly, twice a year what is appropriate for your practice? 14

16 Trust Accounts Prepare Bank Recs by the 25 th of the Month LSUC says you must reconcile your trust bank accounts by the 25 th of the month. Is it OK to skip a month or two (or six) if you have no trust activity? DO: Prepare your trust bank recs by the 25 th of the month (or even before!). DO: Schedule reminders into your calendar if you find you lose track of the dates. 15

17 Trust Accounts and General Accounts 16

18 Trust Account and General Account Staledate Cheques Monthly How long do you have until a cheque is staledated? How do you staledate a cheque? DO: Staledate cheques monthly. 17

19 Trust Account and General Account Duplicate Cash Receipt Book DO: Prepare and fully complete duplicate receipts for all cash that comes into your firm. 18

20 Trust Account and General Account Indicate Payment Method Payment can be received in a number of different forms. DO: Indicate in your PCLaw the method by which the money is received. 19

21 Trust Account and General Account Sort Bank Statements and Recs When you receive your bank statements and prepare your bank recs DO: Sort and organize these in chronological order by bank account. 20

22 Trust Account and General Account Sort All Bank Receipts When you receive a receipt from the bank, whether it is: the stamped deposit slip you printed from PCLaw or the stamped pre-printed form that was issued by the bank DO: Sort and organize these in chronological order by bank account. 21

23 Member s Annual Report 22

24 Member s Annual Report When is the due date for filing? First question in the Financial Reporting Section: 23

25 Member s Annual Report What is to be included in the Financial Reporting Section of the report? Balances of all mixed and separate trust accounts Outstanding deposits Outstanding errors Outstanding cheques Total vs Client Trust Listing is there a difference? Details re: overdrawn trust accounts, if any Details of outstanding deposits, if any Details of Unchanged Client Trust Ledger Account Balances, if any Details of Unclaimed Client Trust Ledger Account Balances, if any DO: File your Member s Annual Report on time. 24

26 Law Society Spot Audits 25

27 Law Society Spot Audits Selection of Firms Most spot audits are selected at random. Other circumstances which trigger a spot audit include: failure to file the Member's Annual Report (MAR) with the Society newly formed law firms to ensure appropriate record-keeping practices and money handling procedures are established and maintained identification of inadequacies during a previous spot audit, which suggest a follow-up audit is prudent to ensure continued compliance information on the MAR, which suggests non-compliance with the Society's record-keeping provisions or Rules of Professional Conduct referral of members/law firms from another Law Society department 26

28 Law Society Spot Audits The consequences are real. The more you comply with the regulations, the better position you will be in when the audit happens. And it will. 27

29 Questions? Leslie Vine, MBA Vine & Associates 28