Solicitors: how healthy are your trust accounts when it comes to receipting compliance?

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By Tim Jones and Emma-Rose Matthews

During my experience as an external examiner, I’ve found that when it comes to their trust account, law practices are generally compliant with most receipting particulars, however, one of the most common areas that errors occur is the failure to meet all deposit record requirements if monies are received via cash or cheque (as opposed to direct deposit).  Materiality is not considered at any stage during an external examiner’s year-end audit and as a result, any breach identified is required to be reported to the Queensland Law Society (QLS).

Solicitors who set up and operate a Trust Account in Queensland report to the QLS and are bound by the Legal Profession Act 2007 (Qld) and the Legal Profession Regulation 2007 (Qld). A law practice operating a Trust Account is entrusted to hold money on behalf of a client. Utilising a Trust Account is an excellent method of reducing non-payment risk as well as being essential for timely transactions in connection with the provision of legal services.

Unlike the income tax year, Solicitor Trust Accounts are required to report to the year ended 31 March. Being just over the half-way mark in the reporting period, this article aims to provide a helpful refresher on receipting compliance with the Regulation.

Solicitor Trust Account receipts are required to record the following particulars:

  • The date the receipt is made out;
  • The date monies were received (if different from above);
  • The dollar amount of money received;
  • The form in which the money was received (eg direct deposit or cheque);
  • The name of the person from whom the money was received;
  • Details which clearly identify the client’s name for whom the moneys were received for; the matter description; and the matter reference.
  • Particulars which sufficiently identify the purpose for which the money was received;
  • The name of the law practice (or, the business name which the law practice engages it’s legal practice);
  • The expression ‘trust account’ (or, ‘trust a/c’);
  • The name of the person who made out the receipt (eg receptionist’s name); and
  • Receipt number (receipts must be consecutively ordered with no duplicate numbers).

When a law practice receives trust monies in the general Trust Account, a receipt must be made out in duplicate unless the details are recorded by a computer program. The original receipt is required to be delivered, on request, to the person from whom the trust money was received.

Depending on the method by which trust monies are received, there may be additional trust account reporting. I’ve found that these additional reporting requirements may be incomplete or absent when performing my duties as an external examiner. The differences are summarised in the following table:

If performing a self-review of your Trust Account records reveals compliance irregularities, the law practice has plenty of time to make the necessary corrections before the year-end audit. It is important to note that after a law practice becomes aware of any irregularities; they are required to notify the QLS in writing as soon as practical. When advising the QLS of such instances, providing evidence of the subsequent correction is recommended.

Want to know more?

If you have any questions in relation to your law practice’s Trust Account compliance health, please don’t hesitate to contact Tim Jones, Business Advisory Director.

An Important Message

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents.  Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

 

 

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