Audit of Legal Practitioners' Trust Accounts
Notes for the guidance of "accountants"
AUDIT DEADLINE -
ON OR BEFORE 31 MAY 2008
Senior Trust Account Inspector: Ms Anna Buckley MBA CPA
Ph: (08) 9461 2268
The Legal Practice Act 2003 (LPA) defines "accountant" in Section 147(1) as
meaning:
- a person registered as an auditor, or taken to be registered as an
auditor, under Part 9.2 of the Corporations Act; or
- a person approved for the purposes of section 72(2) of the Real Estate
and Business Agents Act 1978."
In these notes, a reference to "accountants" means an accountant as defined
in Section 147(1) of the Act.
Section 147(2) of the Act provides that "Every
legal practitioner who is required to maintain a trust account must, when
applying for a practice certificate, give to the Board a certificate from an
accountant to the effect that the legal practitioner's books of account
relating to that trust account have been kept in accordance with the rules, if
any, relating to the keeping of trust accounts."
Section 147(3) of the Act addresses the audit requirement for Incorporated
Legal Practices, stating "Every legal practitioner director of an
incorporated legal practice that is required to maintain a trust account must,
when applying for a practice certificate, deliver to the Board from an
accountant a certificate to the effect that the incorporated legal practice's
books of account relating to its trust account have been kept in accordance
with the rules, if any, relating to the keeping of trust accounts."
Copies of Relevant Legislation and Rules
Accountants should ensure that, in the course of their work, they use
up-to-date copies of the relevant legislation for reference, viz:
Legal Practice Act 2003
Legal Practice Board Rules 2004
Copies of the above may be obtained from the State Law Publisher, Level 1,
10 William Street, Perth (Ph: 08 9321 7688). A link is also available from the Legal Practice Board’s (the Board) website www.lpbwa.org.au
Prescribed test checks and scope of audit work
The Board and The Legal Contribution Trust, which jointly supervise the trust account inspection programme, are concerned that accountants comply with the legislation and:
- include all trust bank accounts in the scope of their audit examinations - even bank accounts in the names of deceased persons for whose estates a practice principal is sole executor; and
- conduct sufficient examinations of the books of account to satisfy the requirements of LPA S140.
Failures by the accountant to include all bank accounts operated by the practice – practice, service trust and all trust bank accounts - in the scope of an examination are unacceptable limitations in the scope of the audit. As required pursuant to AUS702 and AUS106.24, the accountant should state in the accountant’s certificate the nature and extent of any such limitation of scope.
Accountants are reminded of their obligations to comply with the Statements of Auditing Standards issued by the Accounting Bodies, in so far as they apply, to the conduct of their examinations leading to the issue of certificates required under Section 147 - refer also AUS106.24. The Accounting Bodies' Auditing Guidance Statements (AGSs) should be read and interpreted in conjunction with the Auditing Standards. The accountant’s attention is drawn, in particular, to the requirements for risk-based engagement planning and proper audit documentation.
Form of Accountant's Certificate
In completing their certificates approved accountants are asked to ensure that:
- they complete all sections of the form 20;
- they include the following information:
- in addition to the name of the firm, the names of each of the partners of the firm;
- if less than the full reporting period (1/4/2007 - 31/3/2008), the period during which the practitioner was in practice or, in the case of a partner of a firm, his term as a partner of that firm;
- where there has been a change in the name of the firm during the reporting period, the periods applicable to each of the relevant firms;
- any qualifications in their certificates comply with the requirements of Auditing Standard AUS 702;
- the certificate is signed personally by the accountant in his/her own name.
Reporting of exceptions
In the opinion of the Board, “trivial” in the context used in the accountant’s certificate refers to breaches of non-substantive Rules, i.e. Rules which do not go to the substance of the trustee’s fiduciary responsibilities; in particular, but without limitation, to deal with client monies as directed by the client or according to law; or, otherwise, to hold them in trust.
The Board’s view is that breaches of substantive Rules, regardless of amount, should not be regarded as “trivial” for the purposes of the Certificate even though they arose inadvertently through carelessness or other cause. All such breaches should be reported, therefore, in the certificate, whether or not rectified on completion of the audit examination.
“Trivial” breaches i.e. breaches of non-substantive Rules should also be reported in the certificate unless they were rectified before audit completion.
The Board draws attention to the fact that it is the practitioner’s responsibility under Section 140 (of the Act to “maintain books of account of all trust moneys received, deposited and disbursed or otherwise dealt with by that legal practitioner, in such a manner as to disclose the true position as regards those moneys and to enable the books to be readily and conveniently audited”.
Lodgement Requirements and Timetable
The Board requests legal practitioners to lodge their 2008-2009 Practice Certificate renewal applications with the Board by 31 May 2008. Approved accountant’s certificates are required to be lodged by practitioners along with their renewal applications and, therefore, need to be signed and issued in sufficient time to allow practitioners to comply with the legislation.
These are to be lodged with the Board at the following address:
5th Floor
Kings Building
533 Hay Street
Perth WA 6000
Further inquiries may be made to Ms Anna Buckley the SeniorTrust Account Inspector on 9461 2268.
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