A compliance audit is the examination of law firms’ books, records and accounts by a Law Society Trust Auditor.
All law firms are subject to Law Society compliance audits to assess compliance with the requirements of the Law Society Rules, Legal Profession Act, and the Code of Professional Conduct for British Columbia.
The objective of a compliance audit is to ensure public confidence in the legal profession by:
- ensuring lawyers are safeguarding trust funds and are using trust accounts for appropriate purposes;
- ensuring lawyers and firms adhere to Part 3, Division 7 Rules and various parts of the Act and BC Code; and
- providing education, advice and resources to lawyers and law firms on maintaining proper accounting systems and record-keeping practices.
We carry out this objective by completing an in-depth review of accounting records and a selection of client files. For most law firms, this will be a straightforward process. At the conclusion of the audit, the auditor will provide the firm with a formal report and discuss the findings. For more information on compliance audits, please see our Compliance Audit FAQs.
Notification of a compliance audit
The Trust Assurance department will email a letter to the designated representative(s) of the firm advising of the audit period and required records, along with the due dates to submit the records. Upon receipt of the letter, the firm will have one or two weeks to send the client trust ledgers and most recent trust reconciliation for the firm’s main trust account. The remaining records required for the audit are itemized on the Compliance Audit Books & Records Checklist (checklist), which is provided as a link within the letter. The complete records on the checklist are due approximately six to eight weeks from receipt of the letter.
The letter will also include two information sheets:
- Frequently Asked Questions providing further details about the audit program; and
- TitanFile Guidefor External Users explaining the use of the platform and how to upload documents.
An auditor will conduct the compliance audit at the Law Society office, unless other arrangements have been made. Firms can deliver the records listed on the checklist using the following options:
- upload electronic records via TitanFile, using the link provided in our email; or
- deliver records to our office at 845 Cambie Street, Vancouver.
To ensure minimal disruptions, lawyers must provide all records itemized and labeled as indicated on the checklist.
Confidentiality
Section 88 of the Legal Profession Act preserves the confidentiality or privilege that may be contained in any documents provided to the auditor. Section 88 (3) of the Act provides that a person who, during the course of an investigation, audit, inquiry or hearing acquires information or records that are confidential or subject to solicitor-client privilege must not disclose that information or those records to any person except for a purpose contemplated by the Act or the Law Society Rules.
Frequency of audits
Audits are randomly selected, unless prompted by an indicator such as:
- failure to file a trust report or failure to file a trust report in a timely manner;
- information on a trust report that indicates non-compliance with the trust accounting rules;
- a referral from another department of the Law Society; and/or
- deficiencies that were identified during a previous compliance audit.
Non-compliance with an audit
A lawyer who does not produce and permit the copying of records and other evidence or provide the required explanations under Rule 3-85 (2) (b) [Compliance audit of books, records and accounts] may subject to an administrative suspension until the records are produced, copying is permitted and explanations are provided.
Results of the compliance audit
At the conclusion of the audit, the auditor will deliver a Compliance Audit Summary Report and discuss the audit findings. The Trust Assurance department will follow up with a letter providing additional resources. The letter may ask for a written response with information and/or confirmation that the firm has implemented appropriate measures to ensure compliance with specific rules.
If the deficiencies in the trust accounting records are serious, a subsequent audit may be required to assess whether the firm has eliminated the deficiencies and to ensure compliance with the rules. Furthermore, the firm may be required to file a Trust Report – Accountant’s Report for the next reporting period.
Feedback
The Law Society strives for continued improvement of the audit program. At the conclusion of the audit, we provide the designated representative an opportunity to complete a survey and provide feedback.
Forms and resources
Compliance Audit Frequently Asked Questions
Compliance Audit Books and Records Checklist
TitanFile Guide for External Users
Education and resources
Trust Accounting Basics webinar
Trust Accounting Regulatory Requirements webinar
Anti-Money Laundering Measures webinar
Contact us
For more information, contact Trust Assurance at complianceaudit@lsbc.org or 604.697.5810.