Sunday, December 5, 2010

LSUC spot audits – Common errors - #2 of 7

Second on the LSUC’s list of common errors is “Trust reconciliations and trust comparisons in arrears”.  Most law firms already do reconcile both the general and trust bank accounts on a monthly basis.  It is the failure to complete a trust comparison report that is often lacking. 

If you have never done one, you may be asking “What is a trust comparison report?” 
PCLaw has a bank reconciliation feature, which will produce a report on your trust bank account activity for the month.  PClaw also allows you to print a report of all the trust funds held at close of business on the last day of your banking month.  At a bare minimum, you should have already been comparing these two reports to make sure the totals match.  

However, the purpose of creating a new, combined, report is twofold:
  1. The mere act of completing the comparison report forces you to look at the individual entries, not just the totals on the PCLaw reports.  This affords you an opportunity to find errors that might otherwise be missed.
  2. The comparison report provides you with documented proof that you have fulfilled your LSUC obligations.
By-law 9, sec. 18, (8), mandates that the trust comparison reports be completed, and the LSUC expects them to be completed by the 25th day after your trust month end.

Your bookkeeper should be preparing these reports for you, and should highlight any areas of concern.  In the upcoming post #4 of 7, I will discuss the related error of trust inactivity.

Please take some time each month to review the Trust Comparison Reports yourself.  Anything highlighted should be seen as a call to action on your part.

As always, I invite your comments and suggestions for future posts.  Next week – error #3 - Overdrawn client trust ledger accounts.