In real estate, transparent handling of trust accounts is a crucial regulatory consideration. Real estate audits focus on protecting consumers by ensuring trust accounts managed by agencies are in good standing.
Licensed real estate agents and conveyancers in New South Wales should ensure they understand their obligations including how trust account audits work. Brown Auditing Services makes real estate compliance simple, with tailored audits that quickly identify any areas of risk and threats to licence renewal.
What Is a Real Estate Audit?
The Property and Stock Agents Act 2002 (the Act) outlines consumer protection requirements in real estate. Agents who receive money from a client are legally required to deposit it into a trust account held by an authorised financial institution. This money includes sales deposits, rent, bond payments and fees for maintenance or advertising. Agents can open one or multiple trust accounts depending on their needs.
Once there, these funds cannot be used for purposes other than for that client and must be disbursed according to their directions. These regulations are put in place to safeguard consumer interests and maintain trust in the industry. Real estate audits, also known as trust account audits, focus on ensuring these accounts are correctly maintained.
Analytical Audit Procedures in a Real Estate Audit
The government can inspect a trust account at any time. If there are any breaches of the law, penalties apply, including the non renewal of a real estate license. When you engage a real estate auditor, they review trust documentation and examine financial records to see if there are any discrepancies, loss of money, failure to pay or failure to account for trust money. The process also examines compliance with relevant legislation on how real estate trusts should be handled.
Tips for Your Upcoming Real Estate Audit
Any real estate entities preparing for an upcoming audit should ensure their recording keeping for all trust accounts are well maintained and accurate.
● Meet audit deadlines – Time frames for reporting can be strict so speak to your auditor for guidance to ensure you meet the deadlines.
● Maintain records – Trust records must be easily interpreted and kept up to date to ensure any discrepancies in transactions can be identified by auditors.
● Reconcile accounts – Avoid absent or repeatedly late monthly reconciliations. This includes unexplained adjustments or items that indicate poor record keeping and increases the risk of deficiencies in trust money.
In real estate, transparent statements detailing the amount of trust money held must also be provided by agents on the last day of the audit period. You must also state negotiable or bearer securities or deposit receipts held that day for any money drawn from trust accounts.
Best Practices to Stay Audit-Ready
By keeping trust documentation organised, maintaining accurate records and ensuring compliance with consumer protection requirements in real estate, your agency can always be audit ready. Avoid transferring trust money through non-trust accounts as it is illegal and increases the risk of lost trust money that can get mixed in with other business funds.
In addition, ensure you always bank trust money promptly. Any delays in banking trust money by an estate agent increases the risk of loss of trust money. A regular internal audit for real estate agencies can ensure everyone on your team is doing the right thing and not contributing to any compliance risks.
Real Estate Compliance and Audit Services in New South Wales
Brown Auditing Services provides compliance advice for your team and can facilitate an internal audit for real estate agencies in NSW. To learn more about analytical audit procedures in a real estate audit, call us today on 0428 661 200 or contact us online.