May 21, 2019
Well, now I can say we’ve been audited by the State Bar! You may know that we called up Anne Parkin, the State Bar Auditor, and asked that our trust account be audited this quarter, since we weren’t lucky enough to be chosen randomly. The audit went very smoothly. Here are some takeaways:
- Anne likes to see the quarterly reports being done on a monthly basis. When we showed her that we already did this, her eyes lit up.
- She will look at all of your cancelled trust checks for the year, and will make sure the signatures are originals (no signature stamps), you have copies of the fronts and backs of all checks, the client matter name/number appears on the memo line, and the checks are the proper size.
- She only reports consistent violations, not the occasional oversight, to the Office of Counsel.
- If you have a large number of transactions in trust each month, Anne may pick a random transaction to review, and look at all of the supporting source documents (checks, deposit slips, receipts, wire transfer instructions) herself.
- She reviews 12 months of records, including all source documents, starting with your current monthly reconciliation and going backwards.
- For every audit she does, she prepares an audit report with a list of corrections, if any, and submits the report to the State Bar Trust Account Compliance Counsel for review.
According to Anne, things that will result in a referral to grievance include, consistent failure to reconcile (monthly or quarterly), very poor or woefully inadequate record keeping, a pattern of errors, especially where the errors are not documented and corrected within a quarter, and negative client balances that do not have sufficient explanation and have not been corrected within a quarter.
If Anne does note relatively minor errors/deficiencies in your record-keeping, she will prepare a Trust Corrections Request Form, noting the deficiencies. Then, you will be given 30 days to provide evidence of the correction to the State Bar Trust Account Compliance Counsel, Leanor Hodge.
If Anne finds no errors in her audit of your trust account, she will provide you a copy of her report, with the notation, “No follow up needed.” Woohoo, we passed! Although we were confident that we were following all the trust accounting rules, it is always nice when the State Bar agrees. We regularly assist attorneys in preparing for an upcoming trust audit, but it is a good idea not to wait until the State Bar comes knocking at your door. If your trust account needs a procedural check up, let us know. We’d be happy to take a look.