Law Firm Trust Audit Checklist

Trust Audit Checklist

Why This Matters

Trust audits don’t create problems. They reveal what hasn’t been managed properly all year.

If you prepare early, the audit becomes simple. If you don’t, it becomes stressful.

1. Trust Account Reconciliation

Ensure all trust accounts are:

• Reconciled monthly (minimum)

• Up to date until 31 March

• Matching:

  • Bank balance

  • Client ledger balances

  • Trust control account

👉 Any differences must be investigated immediately.

2. Client Ledger Balances

Check that:

• Each client matter has a separate ledger

• No ledger shows a negative balance

• Balances match supporting transactions

👉 Negative balances are a major red flag in audits.

3. Trust vs Office Account Separation

Confirm:

• No mixing of trust funds and business funds

• All fees are:

  • Properly invoiced

  • Transferred correctly from trust to office account

👉 Direct payments from trust without billing = compliance issue.

4. Supporting Documentation

Ensure every transaction has:

• Invoice or bill

• Receipt

• Authorisation (where required)

👉 Auditors will sample transactions, missing documents = risk.

5. Disbursements & Third-Party Payments

Review:

• Barrister fees

• Court fees

• Other third-party payments

Check that:

• They relate to the correct matter

• Proper authority exists

• They are recorded correctly

  
  

6. Trust Receipts & Payments

Verify:

• All receipts are recorded promptly

• Payments are properly authorised

• No backdating or delays

👉 Timing issues often trigger audit questions.

7. Unpresented Transactions

Review:

• Unpresented cheques

• Outstanding deposits

Ensure:

• They are valid

• Not sitting unresolved for long periods

8. Interest & Controlled Money Accounts

If applicable:

• Interest calculations are correct

• Funds are allocated properly

• Records match bank statements

  
  

9. Trust Account Statements

Check:

• Bank statements match records

• No unexplained adjustments

• All months are accounted for

10. Internal Review (Pre-Audit Check)

Before the auditor arrives:

• Run a full trust reconciliation review

• Spot-check random transactions

• Fix errors in advance

👉 This step alone can save hours (and stress).

Common Mistakes to Avoid

• Leaving reconciliations until year-end

• Missing documentation

• Negative client balances

• Incorrect trust transfers

• Relying only on software without review

Quick “1-Hour Pre-Audit” Routine

If you’re short on time, do this:

1. Check latest reconciliation

2. Review 5 random transactions

3. Scan for negative balances (Ideally run a report from your practice management software to show all the balances)

4. Confirm documents are accessible

Final Thought

A clean trust audit isn’t about luck. It's about consistent systems throughout the year.

Book a FREE call with us if you wish to free up your time doing accounting tasks and focus on what truly matters

BOOK A FREE CALL