Real Estate Trust Account Audit Checklist

An extensive real estate trust account audit checklist can reduce human error and help your agency pass its audit with flying colors. Furthermore, this step demonstrates to clients and the wider industry that your agency adheres to strict legislative regulations.

Audit periods, due dates and requirements may differ based on your state and territory. Click this link for more details.

1. Review Financial Statements
EOM should be done on a daily basis to prevent errors from building up and becoming costly errors at audit time. Furthermore, EOM allows for an organized digital paper trail which helps comply with real estate trust account regulations.

PropertyMe’s 100% compliant software enables you to bank fees automatically, import transactions from your bank for easy reconciliation and digitize receipts into digital records – essential components of successful audit preparation. This saves both time and money.

2. Review Cash Flow Statements
For the purpose of conducting a real estate trust account audit, it is vital that open communication be maintained between yourself and your auditor and that all requested documents – including office policy manuals, signature pages and E&O certificates of insurance certificates – be provided promptly.

Keep an eye on your bank statements and ledgers every day, to prevent mistakes from becoming bigger issues and demonstrate transparency for clients.

3. Review Accounts Receivable
Per real estate law, real estate agencies must separate client funds from their agency operating account to promote transparency and show commitment to ethical financial practices.

On receiving their audit notification letter, brokers/brokerage firms are expected to respond within the requested timelines by providing all requested documents such as office policy manuals, signature pages, copies of E&O certificates and property management files as well as monthly 3-way reconciliations.

4. Review Accounts Payable
Real estate agents entrusted by their clients with vast sums of money must keep accurate records to ensure transparency, accountability and protection of client funds.

Auditor will review responses and documents submitted in order to assess compliance with requirements of Act. Brokerage firm will receive a notification audit letter including affirmation statement, questionnaire regarding real estate activity and audit checklist.

Be ready for a real estate trust account audit by following these helpful tips from professional accountants to assure your clients, staff and market that you adhere to ethical financial practices.

5. Review Cash Disbursements
Agencies accepting cash payments for fees, rent and other charges must document and bank them carefully in order to prevent an unpleasant legal dispute or loss of funds. Failing to do this could lead to legal complications or the disappearance of cash altogether.

PropertyMe’s 100% compliant trust accounting software eliminates these risks by creating a clear digital paper trail ready for audit, which not only reduces human error but can help to ease future audit-induced sleep deprivation as well.

6. Review Accounts Payable Receipts
Real estate trust account audits are an essential element of operating any successful business. With the appropriate process and software in place, this audit will become seamless while guaranteeing compliance with regulations.

Prepare for an audit by providing the auditor with your transaction file checklists, office policy manuals, property management files and monthly 3-way reconciliations. Keep open communication with them so you can respond swiftly to findings or concerns raised during an audit.

7. Review Accounts Payable Reconciliations
NSW law mandates that estate agents establish and implement effective financial controls. This may involve segregating trust funds from agency operating funds as well as setting up internal checks and balances.

Aside from requiring dual authorization for certain transactions, and making sure all monies are received and disbursed in accordance with regulations and accounting records are up-to-date, strong software systems such as PropertyMe can make life simpler – with automatic disbursement to owners and vendors at the click of a button, plus upload banking transactions for easy reconciliations.

8. Review Accounts Receivable Reconciliations
Real estate agencies must comply with NSW regulations by regularly reconciling their accounts. Doing this ensures funds are available for owner and tenant obligations and helps identify discrepancies early. In order to do this effectively, it’s essential that standardized procedures for reconciliation be established and documented extensively.

Avoid legal disputes caused by accepting cash payments by having clients sign for receipts instead. It’s an easy solution and will keep you compliant with NSW regulations.

9. Review Accounts Payable Reconciliations and Reports
Real estate trust accounts are more than a bank account; they represent an agency’s ethics and integrity. Maintaining regular, detailed records will help to ensure all funds are kept separate, and any discrepancies can be addressed quickly before becoming more significant issues.

Broker/brokerage firms that perform property management must submit three-way reconciliation reports each month for all trust/escrow accounts managed at their financial institution, including journals, ledgers, reconciled bank statements and copies of cancelled checks.