Law Society of NSW External Examiner Update to be released in March

Law Society of NSW External Examiner Update to be released in March

Published Feb 02, 2019

Next month Solicitors will see The Law Society’s external examiner update for 2019. This blog looks at some of the key findings and how to ensure you’re doing the right thing.

According to the Law Society of NSW,  ‘Under the Legal Profession Uniform Law (NSW) and the Legal Profession Uniform General Rules 2015, a law practice is required to have its trust records externally examined once in each financial year if it has received or held trust money, excluding transit money.

‘An external examination covers a law practice’s trust records from the beginning of April to the end of March in the following year. A report on the examination must be lodged with the Law Society by 31 May each year.’

The Law Society’s external examiner update for 2019 will soon be released. With this in mind it’s a good time to reflect upon external examinations of trust accounts.

It’s also an ideal time to see what we can anticipate for examinations  ending 31 March 2019.

The external examiner’s update highlights some key statistics from the previous year and provides insight from the Law Society for the upcoming external examination season.


  • Qualified examiner reports remain above 10% of all submitted reports. This means in over 350 instances the examiner was unable to form an opinion that the holder of trust money was compliant in all material respects with the regulations. In addition to this, examiners considered noncompliance to be so material they issued 31 adverse opinion reports.
  • There were over 1100 breaches reported to the law society in 2017 which was a 6% increase from 2016.
  • Law society investigations have been increasing. 34 investigations were completed in 2015, 2016 saw a 131% increase to 74 and in 2017 a further increase of 18% to 92.

These are worrying trends when talking about trust and controlled money.

The most common breaches reported were for trust account bank reconciliations recording adjusting items for extended periods of time and for trial balances and bank reconciliations not being prepared within 15 working days of month end.



A number of these breaches could have been easily avoided if holders of trust and controlled money took the following precautions:

  • Took the time to implement internal policies and procedures relating to trust account management
  • Developed a contingency plan in the event the primary manager of the trust funds is unable to carry out requirements
  • Formally train new staff on the policies and procedures
  • Ensured staff involved in managing the trust fund had adequate resources available for advice if uncertain of how to treat specific transactions or issues as they arise
  • Communicated throughout the year with their external examiner regarding any known or suspected breaches of regulations. This would ensure the matter is rectified quickly and documented in a manner that will satisfy examination requirements



We believe planning is paramount as trust accounting can be complex and bookkeepers are often stretched for time.

We recommend that if you have had issues with breaches in the past or if you are looking to gain comfort your procedures are safeguarding you from future issues you should get in contact with a qualified external examiner and discuss:

  • Training staff (particularly new staff) in trust accounting
  • Drafting trust account policies and procedures
  • Providing advice on any trust account issues throughout the year


This blog was written by Jacob Sauer. Jacob is one of our Audit Manager’s responsible for trust account external examinations and consulting. If you have any questions about trust accounting or external examinations Jacob can be contacted on 6773 8400.

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