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The challenges of trust account audits during lockdown

Help is at hand for trust account audits and examinations during lockdown.

Claire Grayston FCPA | May 2020

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 lodgement 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.

Lodgement 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 lodgement 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.

Consequently, 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:

State/Territory
Year End Examiner’s Report Due Law Society Resources
Relief Provided
Australian Capital Territory
31 Mar 31 May

ACT Law Society 

  • Acknowledges the wide-ranging effects COVID-19 has had on the legal profession and is seeking to support members.
  • Practice Certificate fee relief to be provided to all, but no relief specific to trust account obligations.
New South Wales
31 Mar 31 May

NSW Law Society 

  • Qualified examiners’ reports accepted.
  • Case-by-case requests for extension of time to lodge examiners’ reports by email to the Trust Accounts Department at [email protected]
Northern Territory 31 Mar 30 Jun

NT Law Society 

  • No regulatory action if external examination reports are lodged by 1 September 2020.
  • Law practices are encouraged to comply with the current due date where possible.
Queensland
31 Mar 31 May

QLD Law Society 

  • Acknowledges that COVID-19 has impacted how many law practices conduct their practice and has given rise to issues surrounding the management of their trust account.
  • No relief provided, but contact the Trust Account Investigations team on 07 3842 5908 for trust account enquiries.
South Australia
30 Jun 31 Oct

Law Society of South Australia 

  • Some practice management relief provided, but external examiner report lodgement not a pressing issue as yet.
Tasmania
31 Dec 31 Jul

Law Society of Tasmania 

  • In Tasmania, one external examiner is appointed for all law practices, so there is no need for public announcements relating to relief.
Victoria 31 Mar 31 May

The Victorian Legal Services Board + Commissioner 

  • External examiners’ discretion on whether or not to conduct the examination “virtually” or face to face.
  • For virtual examinations, examiners should obtain records via email to complete the audit as best they can.
  • Requests for extensions beyond 31 May considered on a case-by-case basis – email the Regulatory Compliance Programs team at [email protected]
Western Australia
31 Mar 31 May

Legal Practice Board of WA 

  • Trust account examinations may be conducted remotely or via “virtual” examinations.
  • External examination due date cannot be extended; however, reports received after 31 May 2020, but within a reasonable timeframe, will be accepted with no significant consequence to the law practice or the external examiner.
  • Email the Trust Account Team at [email protected] regarding problems with submission of external examination reports by 31 May 2020.

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.

State/Territory
Year End Auditor’s Report Due
Regulator and Link Relief Provided
Australian Capital Territory– real estate, business and stock and station agents
Allocated by Commissioner for Fair Trading
Within three months after the end of the audit period

Access Canberra (Fair Trading) 

  • Trust account audits can be lodged using an online form
  • For enquiries, agents can contact [email protected]
New South Wales – real estate agents and conveyancers
30 Jun 30 Sep

NSW Office of Fair Trading 

  • Reasonable and proportionate response to compliance, including with a business’s, trader’s or organisation’s ability to comply with its statutory obligations due to constraints associated with the pandemic, including timeframes in which to lodge annual returns/reports or other documents
  • To raise difficulties in complying with statutory obligations as a result of COVID-19, contact NSW OFT on 13 32 20
  • CPA Australia is working with NSW OFT to identify issues for audits of real estate agents and conveyancers as they emerge
Northern Territory – licenced business agent, estate agent or conveyancer 30 Jun 30 Sep

Department of the Attorney-General and Justice (Agents Licensing Board of the Northern Territory) 

  • No announcement
Queensland – property agents, motor dealers and debt collectors
The end of the month the licence expires
Four months after year end

The Department of Justice and Attorney-General (The Office of Fair Trading) 

  • Registered trustees and auditors emailed on 1 April 2020 highlighting that due date for lodgement of the Annual Audit Report remains 31 May 2020, but will be reviewed in light of any changes/amendments to the existing COVID-19 lockdown strategy.  For issues or delays in the finalisation of the annual audit report email [email protected].
South Australia – land agents
Two months prior to licence expiry
End of the month of licence expiry

Consumer and Business Services 

  • No announcement
Tasmania – property agents
30 Jun 30 Sep

Property Agents Board of Tasmania 

  • No announcement
Victoria – estate agents
30 Jun 30 Sep

Consumer Affairs Victoria

  • No announcement
Western Australia – real estate and business agents
31 Dec 31 Mar Department of Mines, Industry Regulation and Safety (Consumer Protection) 

Members with concerns regarding trust account auditors’ or examiners’ report deadlines or the response of regulators or industry bodies to requests for extensions can obtain CPA Australia’s support by emailing [email protected]

Claire Grayston FCPA is CPA Australia’s policy adviser for audit and assurance