- If you receive or hold client money as a member in public practice, you need to have a trust account
- Rules apply to managing trust accounts. These rules are slightly different for members in Australia and New Zealand
- Australian members have an additional obligation to have their compliance audited annually
What is client money?
Client money is any money coming into the control of a member in public practice, or any of the member’s personnel which are the property of a client.
It includes money that you and your personnel have no present entitlement.
This doesn’t include fee retainers. It also excludes money dealt with by an insolvency practitioner under any insolvency legislation for which a separate bank account is opened by a receiver, liquidator or similar person.
Keep it separate and safe
All client money must be handled in an account separate to your business funds.
This requires you to establish a separate bank account (or multiple bank accounts) where client monies are held in trust.
Alternatively, members have the option to act as signatory on a client bank account.
In either scenario, you must make sure:
- monies are dealt with according to the client’s instructions;
- you keep adequate records of all transactions; and
- there are adequate internal controls and procedures in place
In Australia, you also need to have your compliance with the requirements of APES 310 audited annually.
Setting up a trust account
You can use a separate trust accounts for each client or pooled trust accounts for multiple clients.
When you operate a trust account, you will need to provide statements to your client after the year-end date.
Arrangements should be put in place with a financial institution for any bank fees or charges on the trust account to be charged directly to the firm's general account.
The name of bank accounts opened as trust accounts must include the words “Trust Account”.
Preparing statements and year-end dates
The applicable year-end date must occur within 12 months of the month-end following your opening a trust account or obtaining the authority to operate a client bank account.
Under Australian Professional and Ethical Standard (APES) 310, once you have set the applicable year-end date for a trust account, you cannot change it without the approval of the applicable professional body.
Where CA ANZ is the applicable professional body for a member or firm, direct your requests to change the year-end date to us.
Any year-end statements that need to be issued to clients under APES 310 must be issued within 30 business days of the applicable year-end date.
New Zealand members
Members handling client money in New Zealand must observe the rules under NZICA Professional Standards 2. PS-2 requires that you prepare and issue a statement containing details of the application of client monies, and any interest earned on a timely basis and at least annually or at the request of the client.
Being a signatory on a client bank account
Members also have the option of acting as a signatory on a client bank account.
The standards applies when you or your staff has authority to transact on a client's bank account as part of the provision of services to that client.
All requirements of the standards (including the need for an audit in Australia) apply in these cases.
You don’t need to be formally appointed as a signatory for the standards to apply. If you have been given the means to transact on a client's account, such as being given a username and password, the standards apply.
The standards does not apply where you have authority to transact on a bank account in a capacity other than as the accountant to a client. For example, it does not apply where you are the director of a company and have authorised transactions in that capacity.
Conducting a compliance audit
Who can conduct an audit of trust accounts and client money?
An auditor of a trust account or client money, must hold a certificate of public practice issued by CA ANZ, CPA Australia or the Institute of Public Accountants. You do not need to be a Registered Company Auditor to conduct an audit under APES 310.
Only members in Australia are required to have their compliance audited.
Performing the audit
APES 310 requires auditors to perform the audit in accordance with Auditing and Assurance Standards, subject to any legal requirements.
The trust account auditor is concerned with the member's compliance with the requirements of APES 310. The audit is not a financial statement audit.
APES 310 includes a sample auditor's report which states that the audit is 'conducted in accordance with applicable Standards on Assurance Engagements including ASAE 3100 Compliance Engagements'.
We have a sample client monies audit program to help our members conducting APES 310 audits.
Appendix 1 of APES 310 Dealing with Client Monies provides an example audit report.
The example is addressed to the professional body, not the client as the auditor is providing assurance to the applicable professional body that their member has complied with the requirements of the standard.
The applicable professional body is the professional body which the member or firm whose trust account is being audited belongs to.
Modified audit reports
Even though an audit report is addressed to us, the auditor is only obliged to send the audit report to us if the report contains a modified opinion.
A modified opinion is a qualified, adverse or disclaimer of opinion. The auditor needs to do this within 15 business days of completing the audit.
We ask that auditors identify the nature and significance of any breaches, their impact and whether appropriate remedial action has been taken in their report.
Auditors should direct copies of reports containing a modified opinion to us.
Unmodified audit reports
Unmodified reports should be kept by the accountant whose compliance has been audited.
They should be made available for inspection when the practice is subject to a Quality Review, unless we request the accountant to supply a copy of the report to us.