Law Practice Trust Account External Examination Readiness

Law Practice Trust Account External Examination Readiness

Legal Profession Regulations 2005 & Legal Profession Act 2004 A Law Practice MUST: Give written notice of opening, closing or changing the Trust account to the Law Society. Record all Trust transaction particulars within 5 working days. After receiving trust money make out a receipt. Report any cash transaction of $10,000 or more to AUSTRAC Avoid causing a deficiency in a Trust account Ledger without reasonable excuse and rectify any deficiency with urgency. Not withdraw Trust money unless a bill had been given relating to the money, and if the person receiving the bill has not objected within 7 days after being given the bill.

Legal Profession Regulation 2005 & Legal Profession Act 2004 A Law Practice MUST: continued... Ensure Trust cheques and other Trust payments are authorised by an authorised principal or other authorised persons. Complete the Trust bank reconciliation and Month-end reports within 15 working days of the end of each calendar month. Print (complete the comparison report) and file a paper copy of Month-end Trust report in the practice. Furnish an account statement for each trust ledger account and or controlled money account to each person for whom or on whose behalf trust money is held when requested or annually as required. Deposit an amount from the general trust accounts into the Law Society s statutory deposit account each year. Have trust records externally examined annually. Keep Trust records for a period of seven years after the last transaction or finalisation of the Matter. For links to applicable clauses refer: cabenet Legal Trust Quick Guide

Four Ws When What Why Who Compliant trust account the system will record the date the entry is made and the date the operator records the transaction as having occurred. This is because regulations require chronological processing sequence. What type of transaction? receipt, payment, or non-bank. What form were the funds received or paid in cash, cheque, EFT, or ADI (bank cheque). Why were the Trust funds received or paid by the practice details entered need to be as specific as possible. Trust receipts need to be specific about the source of the funds do not default to using client name. Also record who in the practice received or paid the funds this may not be the person processing the transaction into cabenet

Other Trust Transactions Bank Deposit - The date when Trust Money received as cash and cheques is taken to the bank must enter the deposit date into the trust system even if you do not use the deposit slip. Trust Journals entries must be in the format FROM matter TO Matter. Trust Adjustments are non-cashbook entries e.g. Bank fees incorrectly charged.

262 Notifications Avoid causing a deficiency in a Trust account Ledger without reasonable excuse and rectify any deficiency with urgency. If an overdraw transaction is processed on a Matter Ledger a 262 notification should be generated (as required under the Legal Professional Regulations). The notification requires a reason for overdrawing the Ledger to be provided, and also details of the action taken to remedy the deficiency.

Practice Trust Records Month-end Reporting Trust Bank reconciliation, Trust trial Balance, Trust Cashbook, Trust Transfer journal, Controlled money report and File maintenance audit journal (Matter edit log). The report must be prepared within 15 working days of the end of the month. By verified and signed by a practice principal. Printed copy held in the practice as the official trust record Archived for seven years with receipts, bank statements, etc.

Common Compliance Issues Transaction Processing delays in processing transactions (not within 5 days), insufficient transaction detail, debit balances in ledger accounts, delays in correcting debit balances, drawing against uncleared funds, late & unidentified deposits, drawing trust funds without an Invoice. Keeping Records not showing the true position, not having records accessible for examination/inspection, incomplete printouts of month-end reports, failure to backup records. Statutory Deposit calculation when commencing practice, accounting for increases /decreases in the SD, communication with the ADI.

Common Compliance Issues contd. Regulation Compliance insufficient information recorded in the source documents, ledger or cashbook. Trust ledger or bank reconciliation out of balance, not producing month-end reporting printouts. Use of a suspense or cost clearing account. Computerised records use of software that does not comply with the Regulations, failure to keep backups of records, failure to test and restore computer functions.

Law Practice Declaration & Trust Money Statement Part A must be completed by all law practices. Part B MUST be completed by practices that have received or held trust money (except transit money) at any time in the year. Law Practices must go to the Law Society of NSW website to complete the PART A and B. Before completing the Part B statement the law practice MUST conclude the month-end trust reconciliation and print the report for 31 st March 2014, to finalise the trust records for the year. Law Practices must advise their appointed External Examiner when the Part B statement has been completed.

External Examination of Legal Trust records The legislation does NOT make provision for an extension of time.

Ready for External Examination? Ensure all the month end trust bank reconciliations have been done to end March. These should be done within 15 working days of each month-end. Copies of each Trust month end report (1 April to 31 st March - with the comparison reports filled and signed by the principal) and the Trust bank statements are filed together for the information of the External Examiner. Complete both Part A and B Statements by 30 April. Ensure you have appointed an External Examiner. Ensure Trust records are available to be examined. For cabenet law practice the easy way is to set the Examiner as a Looker User, so they can review the practice trust records online (saves time and money).

External Examination Report Must be completed and saved on the Law Society website by your appointed External Examiner by 30 May. The cabenet Examination Toolbox is available to assist efficient and comprehensive completion of the annual Trust Account Examination requirements. The Toolbox is accessible to Examiners via the Examiner s Log-in on the Law Society s website, AFTER the law practice has completed the PART B statement.