If you’re a solicitor in NSW, managing a trust account comes with serious responsibilities. Regular audits ensure compliance with legal requirements and protect clients' funds. While the thought of an audit might seem stressful, being well-prepared makes the process much smoother.
Here’s what you need to know to get everything in order before your next trust account audit.
Know Your Obligations
The Legal Profession Uniform Law (NSW) and the Legal Profession Uniform General Rules 2015 set strict rules for managing trust accounts. Solicitors must keep accurate records, follow proper procedures, and submit an external examination report annually.
If you’re unsure about your obligations, it’s worth reviewing the latest requirements from the Law Society of NSW. Staying informed prevents surprises when audit time comes around.
Keep Accurate and Up-to-Date Records
One of the biggest reasons audits become stressful is poor record-keeping. Every deposit, withdrawal, and transfer must be documented correctly. Make sure:
- All receipts and payments are recorded promptly.
- The bank statements match your records.
- Monthly reconciliations are completed and accurate.
A simple habit of keeping records updated can save you hours of work later. Plus, it ensures there are no gaps that an auditor might flag as an issue.
Complete Monthly Reconciliations
Reconciling your trust account every month is a legal requirement, but it also keeps your records in check. Compare your trust account ledger with bank statements and make sure everything matches. If there’s a discrepancy, investigate and resolve it as soon as possible.
Waiting until audit time to sort out errors will only cause stress. The more consistent you are throughout the year, the easier the audit process will be.
Ensure Your Trust Receipts and Payments Are Correct
Every payment into or out of a trust account must be handled correctly. Trust money should only be used for its intended purpose, and payments should be properly authorised. Auditors will check to see if:
- Receipts are issued correctly and contain all required details.
- Withdrawals are supported by clear instructions.
- Payments comply with the trust account rules.
Mistakes in this area can lead to serious consequences, so always double-check transactions. If in doubt, seek advice from a Solicitor’s Trust Account Auditor in NSW before the audit begins
Submit Your External Examination Report on Time
Every solicitor with a trust account must arrange for an external examination by an approved auditor. The report is due by 31 May each year. If you don’t submit it on time, you could face penalties from the Law Society.
To avoid last-minute stress, schedule your examination early. Auditors often get busy towards the deadline, so booking in advance ensures you have enough time to fix any issues before submitting the report.
Be Ready for Spot Audits
Trust accounts can be subject to random audits at any time. The Law Society of NSW conducts these to ensure compliance and identify any potential risks. This is why ongoing good record-keeping is so important—if an auditor shows up unexpectedly, you want to be prepared.
A surprise audit shouldn’t be a reason to panic. If your records are in order, the process will be straightforward.
Seek Professional Advice If Needed
If managing a trust account feels overwhelming, consider getting professional help. A qualified auditor or accountant who understands the rules can help you stay compliant.
Even if you’re confident in your processes, having an expert review your records before an audit can give you peace of mind. Small mistakes can lead to big problems, so it’s always better to be proactive.
Final Thoughts
Preparing for a solicitor’s trust account audit in NSW doesn’t have to be stressful. By keeping records up to date, following legal requirements, and seeking expert advice when needed, you can make the process smooth and hassle-free.
Regular compliance isn’t just about passing an audit—it’s about protecting your clients, your reputation, and your legal practice. Stay organised, stay informed, and audits will become just another part of your professional routine.