The challenges of trust account audits during lockdown

This article was current at the time of publication.

Update 20 May 2020: CPA Australia gives two months' relief for audits of practitioners' trust accounts

CPA Australia will take “no action” in relation to public practitioners who take up to two months additional time to obtain a trust account audit for audits due from 31 March 2020 to 31 August 2020.

This “no action” position means CPA Australia will not take disciplinary action against a public practitioner with a trust account year end between 31 December 2019 and 31 May 2020 who fails to obtain an audit of their compliance with the requirements of APES 310 Client Monies and CPA Australia’s By-Laws within three months of the trust account year end, provided the public practitioner obtains an audit within five months of the trust account year end.

Public practitioners are encouraged to meet the deadlines for obtaining or providing trust account audits where they are able to do so.

Trust account audits and examinations are often small engagements individually, but they are important in providing confidence that clients’ monies are appropriately protected.

Requirements for trust account audits are primarily set at the state or territory level and can mandate very quick turnarounds. Trust accounts would include monies held by legal practices, real estate agencies, conveyancers and accounting firms or sole practitioners for other parties.

For auditors and examiners with a large portfolio of clients who hold monies in trust, this means the work can be condensed, resulting in some very busy work periods.

May is such a month, being the peak period for examinations of the vast majority of legal practitioners’ trust accounts across Australia, with examiners’ reports due for lodgment in most states by 31 May (see table below).

COVID-19 restrictions are creating challenges for members working in public practice trying to gain access to records and adapting to their own, as well as clients’, changed work practices, with many working remotely.

This is putting practitioners under pressure, particularly if they have clients who still use paper-based records. While the current crisis may be the incentive needed to move to entirely electronic records, particularly systems with cloud-based storage and access, that is unlikely to be possible for all legal practices by the end of the month.

Lodgment deadlines are driven by state and territory-based requirements, which can vary widely. CPA Australia has been contacting regulators and industry bodies since the pandemic was declared in early March, to ascertain what relief they could offer from regulatory obligations.

Most jurisdictions acknowledge the challenges faced by businesses and their auditors or examiners with trust account deadlines during this crisis. They have responded with relief ranging from blanket lodgment deferrals to consideration of case-by-case applications.

Practitioners need to assess their clients’ and their own capacity to meet the imposed deadlines and contact the relevant regulator or industry body promptly if additional time is needed.

CPA Australia members working in public practice are also required to have their own trust accounts audited within three months of year end under the Accounting Professional and Ethical Standard APES 310 Client Monies.

Alternatively, if they instead hold an authority to operate a client bank account, their compliance with APES 310 must be reviewed. CPA Australia acknowledges the challenges members face to maintain high-quality services in a period of increased demand for services. Additional time is also needed to conduct existing reporting and auditing or assurance services to an appropriate standard.

Therefore, any member who requires additional time to prepare their trust accounts for audit or to conduct the audit of another practitioner’s trust account is encouraged to contact CPA Australia at [email protected] in advance of the deadline, so that appropriate extensions can be provided.

Legal practitioner trust account examinations

Relief available for legal practitioner trust account examination deadlines in each state or territory is set out below:

Real estate agents, conveyancers and other trust accounts

Most agents’ trust account audits are not required to be completed until 30 September 2020 or deadlines are spread throughout the year, so relief may not yet be needed.

However, CPA Australia is monitoring the impacts of the pandemic as it evolves and liaising with the regulators to raise any member concerns.

Support for members

Members with concerns regarding trust account auditors’ or examiners’ report deadlines, or the response of regulators or industry bodies to requests for extensions, can email us for support: [email protected]