Introduction
A trust-account audit should not be treated as a once-a-year scramble.
The easiest way to make an audit stressful is to wait until the auditor asks for information before checking whether your records are complete.
A better approach is to maintain audit-ready records throughout the year.
For tax practitioners, this is particularly important because the TPB requires practitioners to properly account for money or property held on trust.
Step 1: Understand what money you hold on trust
Start by identifying all situations where your practice receives money or property for a client.
The TPB gives examples including:
- ATO refunds
- Money received for paying tax liabilities
- Money received for specific client purposes
Step 2: Keep trust money separate
Trust money should be separated from the firm’s own money.
The TPB states that practitioners should keep personal or business funds separate from trust money, preferably through a separate bank account.
Step 3: Maintain accurate client records
For every amount held, you should be able to identify:
- Client
- Amount
- Date received
- Purpose
- Amount paid
- Date paid
- Remaining balance
- Supporting documentation
Step 4: Reconcile regularly
Don’t wait for the audit.
Regular reconciliation can identify:
- Missing transactions
- Incorrect allocations
- Duplicate transactions
- Outstanding payments
- Bank-feed issues
- Balance discrepancies
Step 5: Review unusual balances
If a client balance has been sitting unchanged for a long period, investigate why.
Ask:
- Is the money still required?
- Is the client entitled to it?
- Has the purpose changed?
- Is supporting documentation available?
Step 6: Check your receipts and payments
Make sure each transaction is supported by appropriate records.
Where money has been paid to the client or another party, retain the relevant evidence.
Step 7: Maintain an audit trail
Corrections should be documented rather than simply overwriting the original transaction.
A clear audit trail helps explain:
- What happened
- What was changed
- Why it was changed
- Who made the change
- When it happened
Step 8: Prepare your audit file
Before the auditor begins, prepare:
- Bank statements
- Reconciliation records
- Client ledgers
- Receipts
- Payment records
- Authority documents
- Relevant reports
- Supporting correspondence
- Transaction history
Step 9: Review your controls
Ask whether only authorised staff can:
- Create transactions
- Approve payments
- Make changes
- Access sensitive information
Step 10: Don’t wait until the audit
The best audit preparation happens throughout the year.
A monthly or regular internal review is usually much easier than trying to reconstruct twelve months of transactions at the end of the audit period.
How TrustEasy can help
TrustEasy provides statutory trust-account tools for Australian accounting firms and tax practitioners.
The platform includes bank feeds, reconciliation, audit trail, reports and other trust-account functions designed to support structured management of client money.
Conclusion
There is no software that can guarantee an audit result.
But a well-designed process can make it easier to keep accurate records, identify discrepancies early and provide the evidence an auditor needs.
The goal should not be to “survive” the audit. The goal should be to keep your trust account audit-ready throughout the year.
