Working with trust accounts is never a simple thing. In a trust account, the amount of funds in that account, whether big or small, is held by a third party for specific purposes. Whatever the purpose of the fund may be, whether it is used to cover costs or even to save money, the account will need auditing every so often. However, it won't necessarily be you who will have to carry out the auditing, but rather a third-party examiner called an “external examiner.”
If you’ve never had experience with this process before, then here is what you need to know about auditing trust accounts, as well as working with an external examiner:
Auditing Trust Accounts
How often must you audit your trust accounts? The answer to this will depend on the state or province that you are in. Generally, you will need to carry out the audit at least once every year. However, the exact date of the audits will differ. For example, South Australia will have its audit cycle carried from July to June of the next year, while in New South Wales, that would be from April to March of next year. Do note that the first month mentioned will generally be the date you start, and the month of next year is the date where all audits must be completed and submitted.
Additionally, the Law Society has enforced a rule where, when you and your external examiner carry out the audit, you must do so at the same time and with the same procedures. Otherwise, you are violating their regulations.
Working with External Examiners
What can you expect when you work with an external examiner? Despite having a third party present, you can expect to have plenty of work to do on your side still.
Trust accounts are sensitive, and as such, you wouldn’t want to end up working with an unofficial examiner. For this reason, you must only work with those who are registered to do so, and these people are usually the ones that are appointed by the Law Society itself to carry out the audit. Generally, a law practice will select the external examiner for you, as well as give them plenty of time to review and comply with your state's requirements. Other things you can expect to be doing on your end is setting up a meeting with the examiners, as the date, time, location, and additional essential information regarding the appointment needs to be recorded in writing.
Note that the things we have said so far will not always apply to you, so always check with your state laws to be sure.
Carrying out audits for your trusted accounts can be stressful, especially since regulations will differ from state to state. As such, you’ll have to go to the right authorities and institutions to familiarize yourself with the regulations.
If you need help making decisions in this regard, we highly recommend that you work with an accountant. With their knowledge and skill, you’ll be able to make sure that you don’t get yourself into unnecessary trouble when it comes to compliance with the laws and regulations of auditing trust accounts.
Are you looking for a small business accountant to work with? We are here for you. Contact us today through our website.