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Ace your trust account audit

By Jane Morgan
20 July 2016 | 1 minute read

It’s audit time! You’ve just come up for air after the end of the financial year and now the topic of audits is on everyone’s mind.

There is nothing like an impending audit to raise the blood pressure and threaten the satisfaction of a full night’s sleep.

However, fear not, as the reality is not as bad as what your mind can imagine it to be. If that thought doesn’t help still your mind, we’ve compiled a handy checklist of the items your auditor will request, and a heads-up on other items they will be on the look-out for.

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For those new to the game, auditors will be auditing records for the previous financial period – being 1 July 2015 to 30 June 2016. Auditors will generally audit a sample of your financial records, not the whole 12-month period. They use a three-month sampling technique, whereby they look at every transaction for a three-month period and draw an overall audit conclusion from these findings.

So, satisfy everything on this list to both enter your audit with confidence and prevent any future audit-induced sleep deprivation.

Your audit checklist

A standard audit will request the following items for each trust account by month:

  • Receipts cashbook/receipts journal
  • Payments cashbook/payments journal
  • Ledger accounts
  • Trial balance
  • Reconciliation
  • Hard copy of the bank statement (not transaction history) plus any statement records you’ve used when reconciling
  • List of any account adjustments
  • Copies of electronic funds transfers
  • Remittance advices
  • Unpresented cheques list
  • Unpresented deposits list
  • Journal report
  • Banking deposit slips
  • Cheque book, including any cancelled cheques

If requested, you must be able to access copies of receipts from your trust accounting software. While it is not a requirement to print these on a daily basis, you have to be able to produce them if requested.

On top of these audit requests, your auditor will also be checking:

  • Depending on your state, have records been made in English or can they be converted into English?
  • Has the trust account fallen into negative throughout the year?
  • Depending on your state, has the licensee, licensed agent or officer in effective control been signing off on records within the prescribed period?
  • Has trust money been banked within the prescribed time?
  • Have statement of accounts been provided?
  • Do source documents contain the UID? (NSW only)
  • Are transactions sequential and do they provide a clean audit trail?
  • Is the software used by the agency compliant within the relevant legislation?

What happens if I fail my audit?

In NSW, if you fail your audit or have been found to be in breach of the Property, Stock and Business Agents Act or Regulations, you have received a ‘Qualified Audit’ and must notify NSW Fair Trading.

The unfortunate terminology of ‘Qualified Audit’ understandably confuses some agents into believing they have received a ‘good’ audit – so be sure to be up-to-date with your terminology before your audit result comes in.

Make audit stress a thing of the past

Audits are a complex beast and are not to be taken lightly. Any breaches or failure to complete an audit can not only cause a whole lot of pain and stress, but can cost you thousands.

To ensure your agency passes its next audit with flying colours, engage a trust accounting professional with experience and knowledge in your relevant state legislation to manage your accounts and audit process. They will ensure all your financials are in place to satisfy your state’s regulations, identify any gaping holes prior to audit and manage the audit process from start to finish.

Make audit stress a thing of the past and focus on what you do best.

Ace your trust account audit
Jane m
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ABOUT THE AUTHOR


Jane Morgan

Jane Morgan

Jane is a licensed Real Estate Agent & Strata Manager in NSW. She has 18 years industry experience, 15 of which have been spent directly in Real Estate, and 3 years as a trainer.

Jane established End of Month Angels in 2012, a consultancy firm specialising in providing trust accounting solutions for busy agencies.
As a trust accounting trainer at the Australian College of Professionals and Real Estate software trainer, she is constantly engaging in professional development in order to stay on top of legislative requirements to ensure that clients receive the highest level of service available.

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