How to Prepare for a Trust Account Audit
A state bar trust account audit or review checks that client funds were handled according to your state’s rules. Most of the work is having complete, reconciled records ready: bank statements, client ledgers, and monthly three-way reconciliations. Firms that reconcile every month find audits far less stressful.
What Is a Trust Account Audit?
Many state bars have programs that audit or review attorney trust accounts. Some are random, and others can be triggered by an overdraft notice or a complaint. Requirements vary by state, so always follow your state bar’s rules.
Records Auditors Typically Request
Trust bank statements, deposit records, and cancelled checks or disbursement records
The trust account journal or general ledger
An individual ledger for each client
Monthly three-way reconciliations
Settlement statements and fee agreements for disbursed matters
Your state’s rules set which records you must keep and for how long.
Common Problems Auditors Find
Reconciliations that weren’t done monthly, or don’t balance
Negative client balances
Earned fees left in trust, or firm funds mixed with client funds
Disbursements made before deposits cleared
Missing or incomplete client ledgers
How to Get Ready
Confirm every month in the audit period has a completed three-way reconciliation.
Review each client ledger for negative balances or unexplained activity.
Gather bank statements and supporting documents in one place.
Fix any errors you find, and document how they were corrected.
Set up a monthly routine so the next review is easier.
If reconciliations are missing for several months, a catch-up project can rebuild them. See: Law Firm Bookkeeping Cleanup.
How Azar Insights Helps
Monthly three-way trust reconciliations
Rebuilding past reconciliations and client ledgers
Organized, audit-ready trust records
See: Trust Account & IOLTA Reconciliation
Frequently Asked Questions
What triggers a state bar trust account audit?
It depends on the state. Some bars run random audits. Others review accounts after an overdraft notice from the bank or a client complaint.
What records do I need for a trust account audit?
Typically trust bank statements, the trust journal, individual client ledgers, monthly three-way reconciliations, and supporting documents for deposits and disbursements. Check your state bar’s rules for the exact list.
What if our reconciliations aren’t up to date?
Bring them current as soon as possible. Past reconciliations and client ledgers can usually be rebuilt from bank statements and billing records.
Can a bookkeeper help with a trust account audit?
Yes. A bookkeeper with trust accounting experience can reconcile and organize your records. The attorney remains responsible for compliance with the state bar’s rules.
How can we make future audits easier?
Reconcile every trust account monthly, review client ledgers for problems, and keep supporting documents organized as you go.
Attorneys remain responsible for complying with their state bar’s trust accounting rules.
Related Reading
Trust Account & IOLTA Reconciliation · Bookkeeping Cleanup · Contingency Fee Accounting
About Azar Insights
Azar Insights provides outsourced bookkeeping, accounting, and fractional controller and CFO services for law firms nationwide. With 15 years of accounting experience, we work remotely with solo attorneys and multi-partner firms using secure, cloud-based tools.