One of the more common transactions handled by lawyers are trust liability reconciliations and cleanup. Essentially, the reconciliation is the process of accounting that verifies the accuracy in the recording of trust transactions.
As long as there is an active and open trust account, these reconciliations must be completed monthly, regardless if there have been any transactions of the same nature conducted that month, or not.
What is a Trust Account Audit
Otherwise known as IOLTA, short for Interest on Lawyer Trust Accounts, this trust account designates the client as the income beneficiary, while the interest is remitted to the Lawyers Trust Fund.
During a Trust Account Audit, it must be verified that all the documentation regarding these transactions are accurate, from the invoice to the amount due, the amount applied, and the remaining balance.
At the end of the audit, it must also be shown that there are sufficient funds in the trust. This is also the opportunity to correct any items that are unreconciled, so lawyers must pay keen attention to details.
Forensic Accounting
Meanwhile, forensic accounting involves auditing and taking investigative steps as necessary to conduct a comprehensive review of a business or individual’s finances. Forensic accounting does not just rely on the data appearing in the accounting sheets, but also factors in the context and realities that the business is in, which could have contributed to their current financial state.
Forensic accounting is particularly useful in case of suspected or alleged financial crimes such as fraud and embezzlement.
Hire a Consulting Group
A consulting firm such as Koma Consulting Group can be very helpful for lawyers and firms because they would know exactly what problems to look for, and what issues they need to anticipate so that they can be immediately addressed with the right solution.
Failing the Trust Audit has severe consequences, including losing the license to practice, so it’s best to leave it to the professionals. IOLTA is a very nuanced part of the legal business, and so having accounting practitioners are the right people to seek help from.