It’s audit time. You’ve just come up for air after EOFY and now the topic of audits are on everyone’s minds. There is nothing like an impending audit to raise the blood pressure levels and threaten the satisfaction of a full night’s, rested sleep.

However fear not, as the reality is really not as bad as what your mind can conjure it up to be. If that thought still doesn’t help still your mind, we’ve compiled a handy checklist of the items your auditor will request, and a heads up on other items your auditor will be on the look out for.

For those new to the audit game, auditors will be auditing records for the previous financial period – being 01/07/15 – 30/06/16. Auditors will generally audit a sample of your financial records – not the whole 12 month period. They use a 3 month sampling technique where they look at every transaction for a three month period and draw an overall audit conclusion from these findings.

So, satisfy everything on this list to both enter your audit with confidence and prevent any future audit-induced sleep deprivation.

YOUR AUDIT CHECKLIST

A standard audit will request the following items for each trust account by month:

  • Receipts cashbook / receipts journal
  • Payments cashbook / payments journal
  • Ledger accounts
  • Trial balance
  • Reconciliation
  • Hard copy of the bank statement (not transaction history) plus any statement records you’ve used when reconciling
  • List of any account adjustments
  • Copies of EFT transfers
  • Remittance advices
  • Unpresented cheques list
  • Unpresented deposits list
  • Journal report
  • Banking deposit slips
  • Cheque book including any cancelled cheques

If requested, you must be able to access copies of receipts from your trust accounting software. Whilst not a requirement to print these on a daily basis, you have to be able to produce them if requested.

On top of these audit requests, your auditor will also be checking:

  • Depending on your state, have records been made in English or can they convert to English?
  • Has the trust account fallen into negative throughout the year?
  • Depending on your state, has the licensee, licensed agent or officer in effective control been signing off on records within the prescribed period?
  • Has trust money been banked within prescribed time?
  • Have statement of accounts been provided?
  • Do source documents contain the UID? (NSW only)
  • Are transactions sequential and provide a clean audit trail?
  • Is the software used by the agency compliant within the relevant legislation?

WHAT HAPPENS IF I FAIL MY AUDIT?

In NSW, if you fail your audit or are found to be in breach of the PSBA Act or Regulations, you will receive a ‘Qualified Audit’ and must notify NSW Fair Trading.

The unfortunate terminology of ‘Qualified Audit’ understandably confuses some agents to believe they have received a ‘good’ audit. Be sure to be up-to-date with your terminology before your audit result comes in.

MAKE AUDIT STRESS A THING OF THE PAST

Audits are a complex beast and are not to be taken lightly. Any breaches and failure to complete an audit can not only cause a whole lot of pain and stress, but can cost you thousands.

To ensure your agency passes its next audit with flying colours, engage a trust accounting professional with experience and knowledge in your relevant state legislation to manage your accounts and audit process.

They will ensure all your financials are in place to satisfy your state’s regulations, identify any gaping holes prior to audit and manage the audit process from start to finish.

Make audit time stress a thing of the past and focus on what you do best.

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~ Jane Morgan is the Director of End of Month Angels, a consultancy firm specialising in Trust Accounting. Jane knows the legislative requirements of running a successful Real Estate office through her 19 years industry experience. Don’t trust just anyone with your trust accounting, trust End of Month Angels and get back to what you do best – growing your business.