Updates About COVID-19 (Coronavirus) - Learn More

Could You Survive a Trust Account Audit?


Are your trust accounting practices sufficient? They may not be if your system doesn’t include these essentials:

Ledgers — The ABA’s Model Rules for Client Trust Account Records require you to maintain an individual ledger for each separate trust or beneficiary client. 

Even if it’s only a simple spreadsheet, the ledger should outline the source of all funds deposited, the names of all persons for whom the funds are held, the amount of such funds, the descriptions and amounts of charges or withdrawals, and the names of all persons or entities to whom such funds are disbursed. 

Journals — You’ll also need to maintain receipt and disbursement journals with a record of deposits to and withdrawals from client trust accounts. Specifically identify the date, source and description of each item deposited, as well as the date, payee and purpose of each disbursement.

Accounting summaries — Provide a summary either as part of your invoice or as a separate “client trust ledger report.” This is basically a spreadsheet showing all deposits and withdrawals and the current trust balance. 

Reconciliation — Prepare a monthly reconciliation of the balances in the trust ledger book, the trust receipts and disbursements journals, the bank account checkbook, and bank statements. For added assurance, conduct a three-way trust account reconciliation, which ensures that your IOLTA bank balance matches your checkbook trust balance and that they both match the sum of all individual client ledger balances. 

Your accounting system can be as basic as a manual "one-write" or "pegboard" system where the date, payee, purpose, check number, etc., are all automatically recorded in the journal when the check is written. Or you can automate the process using QuickBooks or your practice management software. 

The bottom line is that you are ultimately responsible for managing these funds and staying in ethical compliance.


Related Posts

Saltmarsh CPA - Who We Are

Who We Are

Our professionals have the depth of experience, industry knowledge and worldwide resources to help you reach your goals. We put your success above all else as your trusted advisor.

Saltmarsh CPA - What We Do

What We Do

Saltmarsh offers a full range of professional services to accommodate your needs – from tax planning and accounting services to information technology and employee benefits consulting.

Saltmarsh CPA - Who We Serve

Who We Serve

Saltmarsh serves individuals and businesses. Personal attention, access to the right professionals and rapid response is how we serve.

Contact Us

(850) 243-6713

(407) 203-8990

(615) 661-0885

(850) 435-8300

(813) 287-1111

(800) 477-7458

Stay Connected

Sign up to receive updates and important information from Saltmarsh!