I. INTRODUCTION
9.1 We outlined in chapter 7 the present system of accountants’ examinations in New South Wales. In this chapter we concentrate our discussion and recommendations on one central issue, namely, whether these examinations should have to be more rigorous than is currently required. Other issues relating to examinations are considered in chapter 10.
9.2 When considering this central issue, one of the most controversial and important questions is whether the examination should be required to constitute an audit. Accordingly, much of this chapter is concerned with the nature, objectives and efficacy of audits. But we do not regard the basic issue as being a choice between examinations and audits; indeed, we regard an audit as a type of examination Moreover, the currently required type of examination could be made substantially more rigorous without being required to constitute an audit In fact it could be made more rigorous than some types of examination which are described as audits.
9.3 We begin by discussing the general question: should examinations have to be more rigorous? We then look at a number of ways in which greater rigour could be achieved. The chapter concludes with a series of recommendations arising out of the preceding discussion.
II. SHOULD EXAMINATIONS HAVE TO BE MORE RIGOROUS?
A. Criticisms of the Present Examination
9.4 Criticism of the present examination requirements has been voiced from a number of sources within both the legal and accounting professions. For example, the Auditor General of New South Wales, Mr. Jack O’Donnell has referred to
“the prime defect that although there is a requirement to keep accounts in such a manner that they may conveniently be audited, there is no requirement that the accounts be audited. The checks stipulated when an accountant is called in to provide the annual certificate can in no way be regarded as an audit. They are completely inadequate to reveal any wrongdoing. Perhaps they cause an even greater evil. The uninformed public, knowing that an accountant has access to the books, are likely to assume, wrongly, that their interests are being safeguarded by an audit. This could lead them to forsake elementary checks on their solicitors’ handling of their affairs which business prudence would otherwise induce.”1
Mr. O’Donnell added that the Public Accountants Registration Board, of which he is Chairman “is not happy with the situation.”2
9.5 The Accounting Research Centre of the University of Sydney has expressed the view that if the examination requirements are
“intended to provide protection to the clients of solicitors in relation to [trust moneys, they] can only be described as grossly inadequate”.3
The Centre’s criticisms included the lack of any requirement that the accountant check that the Solicitors Trust Account Regulations have been complied with and “form an opinion whether all trust funds have been properly accounted for.”4 The Centre also emphasised that the required examination does not constitute an audit. Instead, it is
“only the most cursory examination of a very limited number of matters.... Accountants appear to recognise the fact that an audit is not required, and that the Professional Auditing Standards do not apply”.5
We return later to a discussion of the nature of an audit, and of the Auditing Standards referred to by the Centre.6
9.6 Coopers and Lybrand, a leading firm of accountants, has made detailed criticisms of the wording of the report which accountants are required to submit.7 In summary, they criticise the vagueness and superficiality of the requirements, especially the general failure to require accountants to look behind documents in order to check whether they have been prepared property.” Essentially,” they say
“the provisions are deficient because they relate mainly to peripheral matter and they avoid the one fundamental issue, that is, the need to ensure that all trust moneys have been properly accounted for in accordance with the regulations. Plainly the present regulations neither require nor enable the accountant to report that trust moneys are properly accounted for. As matters stand, the reporting accountant is neither required nor able to examine records other than those relating to trust moneys; and he has no access to the solicitors files. Without full access to all records it is not possible for the accountant to express the required opinion”.8
9.7 A number of solicitors have indicated to us that they do not consider the present examination requirements to be sufficient Some of these favour the introduction of compulsory audits. Both the Law Society and the Joint Legislation Review Committee of the principal associations of accountants in New South Wales (hereafter referred to as the Joint Committee) have agreed that the present examination requirements “do not in themselves provide adequate protection against dishonesty or incompetence” by solicitors in the handling of trust moneys.9 The Law Society has proposed more thorough inspections by its inspectors10 and is considering introduction of “more rigorous and demanding” accountants’ examinations.11 The Joint Committee agrees with the Society in relation to inspectors12 but also has supported proposals for the introduction of compulsory audits in place of the current accountants examinations, provided that the accountants conducting the audit have unrestricted access to all accounting records and related information”.13
9.8 In practice, it is clear that accountants’ examinations often go further than is required by law. At our request, the Accounting Research Centre carried out in 1979 a survey of chartered accountants in New South Wales.14 Between them, the respondents had carried out some 946 examinations of solicitors’ trust accounts in the previous year.15 The following table indicates the number of these examinations which the accountants described as going beyond the statutory requirements.16
| Size of Solicitors Practice being Examined | Number and Percentage of Examinations which exceeded Statutory Requirements |
 | |
| Sole Practice | 181 - (56%) |
| 2-3 Partners | 165 - (46%) |
| 4-9 Partners | 156 - (69%) |
| 10 or more Partners | 43 - (97%) |
| Total | 545 - (56%) |
The survey indicated that in some instances the requirements were exceeded at the request of the solicitors in question, but it appears that in many other instances the decision to do so was made by the accountant.17 The most common types of additional work were sampling trust account receipts, checking the internal control system, examining the general accounts, and checking authorities for withdrawals.18
9.9 A number of criticisms about the present system of accountants’ examinations relate to matters other than the general nature of the examination. For example, it is asserted that the examination should include additional specific requirements (such as contact with clients to check the accuracy of trust account records relating to them) or that measures should be taken to improve the independence and expertise of accountants undertaking the examinations. These criticisms are considered in the next chapter.
B. The Nature and Scope of an Audit
9.10 Reference has been made in preceding paragraphs to the concept of audits. The following comments on the nature and scope of audits are taken from a report commissioned by us from Coopers and Lybrand:
“Audits may be classified as (a) statutory audits, e.g. those required under the Companies Act; or (b) extra-statutory audits, e.g. those required by agreements between parties. The nature and scope of the examinations to be carried out both in statutory audits and non-statutory audits are determined by the specific or implied terms of the engagement [between auditor and client], often dictated by the form of report required from the auditors...
Under the Companies Act, auditors are required to express an opinion primarily, on the truth and fairness of annual accounts [balance sheets, profit and loss statements and related notes] of companies.... Other types of audit reports are [however,] often required both by a statute and by contract..
Although the term “audit’ is loosely applied to all examinations by auditors, this [report] confines the term to an examination free of restrictions, carried out by an independent registered public accountant Here, “ free of restrictions” means that no restrictions are imposed by the terms of the engagement on the work to be done by the auditor for the purpose of his report.... Auditing is concerned with verification the examination of financial data for the purposes of Judging the faithfulness with which they portray events and conditions.”19
9.11 For many years, audits involved the detailed examination of every record of each transaction not only in the accounts but also in files and other documents. Nowadays the emphasis is on an examination of the accounting and financial control systems being used, rather than of every transaction. This involves the auditor making a professional judgment on the appropriate steps to be taken in relation to the particular organisation and accounts being audited. In 1980 the International Federation of Accountants made the following statements about the nature and scope of audits:
“The auditor assesses the reliability and sufficiency of the information contained in the underlying accounting records and other source data by:
(a) making a study and evaluation of accounting systems and internal controls on which he wishes to rely and testing those internal controls to determine the nature, extent and timing of other auditing procedures, and
(b) carrying out such other tests, inquiries and other verification procedures of accounting transactions and account balances as he considers appropriate in the particular circumstances.
The auditor determines whether the relevant information is properly communicated by:
(a) comparing the financial statements with the underlying accounting records and other source data to see whether they properly summarize the transactions and events recorded therein, and
(b) considering the judgments that management has made in preparing the financial statements; accordingly, the auditor assesses the selection and consistent application of accounting policies, the manner in which the information has been classified, and the adequacy of disclosure.
Judgement permeates the auditor’s work; for example, in deciding the extent of audit procedures and in assessing the reasonableness of the judgements and estimates made by management in preparing the financial statements. Furthermore, much of the evidence available to auditors is persuasive rather than conclusive in nature. Because of the above factors absolute certainty in auditing is rarely attainable.”20
9.12 The term “audit”, then, is not a precise term of art connoting a specific and exhaustive set of steps which must be taken in the examination and a specific list of matters which must be dealt with in the report. On the other hand, the term does have a substantial number of general and specific connotations for accountants, even though in some instances there may be disagreement amongst accountants over certain issues. Particular mention should be made here of the Statement of Auditing Standards21 and Statements of Auditing Practice22 which have been drawn up and published by the two principal associations of accountants in Australia. The Standards are described by the association as “the basic principles which govern the auditor s professional responsibilities and which must be compiled with whenever an audit is carried out”.23 Failure to observe the Standards will be regarded by the two associations as grounds for disciplinary action.24 The Standards apply “to audits generally” rather than only to company audits.25 The Statement of Standards is supplemented by Statements of Auditing Practice which are concerned with “the procedures by which the Standards may be applied”.26 These Statements “provide authoritative guidance” and if accountants “find it necessary to significantly depart from [them], they must include in their working papers details of the departure and their reasons.”27
9.13 The current Standards comprise twenty five paragraphs dealing with matters such as the scope of an audit, confidentiality, independence, planning, documentation and reporting.28 The Statements of Auditing Practice, of which there are nineteen at present, are considerably more detailed than the Standards. They cover topics such as controlling the quality of audits, audit evidence, planning, documentation fraud and error, and auditing of computerised accounts.29
9.14 In addition to these official Standards and Statements, there is, or course, a very substantial body of literature (and some case law)30 on the duties and techniques involved in conducting an audit, and a considerable amount of unwritten custom and lore on these topics amongst accountants. Nevertheless, where statutes require “an audit” to be conducted, they commonly add certain general and/or specific statements about the nature of the required examination For example, as we have mentioned, the Companies (New South Wales) Code requires auditors to express an opinion on whether certain accounts are “ properly drawn up... so as to give a true and fair view” of certain specified matters31, and to report any “deficiency, failure or shortcoming” in relation to certain specified matters (such as the adequacy of returns received from branch offices”).32
9.15 The application of general auditing principles to an examination of solicitors’ trust accounts would result in differing types of examination for different practices. Relevant factors would include the size of the practice, the types of work which it undertakes, its internal control systems, and its general office systems. Factors such as these could affect, for example, the nature and extent of the testing and sampling undertaken. The size of a practice is of special relevance because in smaller practices it is difficult-if not impossible, to have internal control systems which prevent or greatly inhibit incompetence or dishonesty by a principal in the firm. Accordingly, it may be necessary to place greater emphasis on examining transactions, rather than systems, when auditing these practices.
C. Audits and the Detection of Fraud
9.16 One aspect of the nature of an audit about which some confusion has arisen is the extent, if any, to which it must be directed towards discovering frauds or defalcations. There is no doubt that audits cannot be expected to detect all frauds or defalcations. But that does not necessarily mean that such detection is not, or should not be, their primary purpose or one of their principal purposes. It is quite possible, of course, that the purposes should differ substantially according to the type of audit being undertaken. We have pointed out earlier that there is no precisely-defined standard form which an audit must take. For example, company audits may be concerned more with matters such as fair calculation and presentation of asset values and operating profits, than with detection of fraud by a director or employee. Also, the proper purposes may be determined, or at least affected, by specific statutory requirements.
9.17 In Victoria, solicitors’ trust accounts must be subjected to “an audit, made in accordance with” certain statutory rules.33 The Dawson Committee, established by the Victorian Government to enquire into the regulation of solicitors’ trust accounts and certain related matters, reported in 1977 that in its view
“it is clear from the solicitors trust account rules that a primary aim of an audit of [such] accounts is the discovery of any illegality or irregularity and that its concept and philosophy are different from those of a commercial audit.”34
9.18 It should be noted that the question of detecting “fraud or error” is dealt with in a Statement of Auditing Practice. The Statement is directed principally towards company audits. It says, amongst other things, that an
“auditor should plan his audit so that he has a reasonable expectation of detecting material misstatements in the financial information resulting from fraud or error... Due to the inherent limitations of an audit... there is ability that material misstatements of the financial information resulting from fraud and, to a lesser extent, error may not be detected. The subsequent discovery of [such] material misstatement ... does not, in itself, indicate that the auditor has failed to adhere to the basic principles governing an audit.... The auditor should plan and perform his audit with an attitude of professional scepticism recognising that he may encounter conditions or events during his examination that would lead him to question whether fraud or error exist.”36
9.19 In our Discussion Paper we said that
"whatever may be the objectives of a commercial audit, we believe that the major objective of an audit of a solicitor’s trust account is the detection of frauds, defalcations, allegations and irregularities.”37
In its response to our Paper, the Joint Committee of accountants said that it wished
“to point out in the strongest possible terms that auditors cannot be expected and no accountant would be willing to report that he is of the opinion that no fraud or defalcation has taken place. However, the [two associations of accountants] acknowledge the strong deterrent effect of an audit requirements.”38
It should be noted that we did not suggest a requirement of the kind criticised by the Committee.
9.20 The Auditor-General, Mr. O’Donnell, has expressed concern about the Committee’s views quoted in the previous paragraph.39 He said in part:
“I acknowledge that an auditor cannot be expected to uncover every minor or well-contrived fraud. However, I must repeat my very strong view that an accountant who does not undertake the task with an awareness of the risk of fraud and set as his objective the detection of it, himself is misrepresenting his services to the general public.”40
He added that he endorsed “whole hearted the comment in our Discussion Paper which we have quoted above.41 Mr. O’Donnell made these comments in the context of solicitors’ trust accounts but also expressed the view about audits generally that “there is still a strong community expectation that an audit is some form of protection against or discovery of fraud”.42
9.21 In conclusion it should be pointed out that, whether or not an audit concentrates on prevention or detection of fraud, it may further these goals indirectly by preventing or detecting incompetence or negligence which otherwise might have given rise eventually to dishonesty. As a committee of lawyers and accountants in Victoria has pointed out,
“experience over many years confirms that the solicitor who starts with the deliberate intention of stealing his client s moneys is extremely rare. Even those who are finally dishonest usually commence with muddling and poor accountancy”.43
Our investigations indicate that this statement is true also of New South Wales.
D. Considerations of Cost
9.22 One of the most important matters to be borne in mind when considering whether the present accountants examination should be made more rigorous is, of course, the increased cost which would be involved. It is, however, very difficult to develop accurate estimates of the cost of any such reform. Much depends on the precise nature of the new requirements, the type of solicitors practice being examined, the type of accountants’ practice conducting the examination the relationship between the two practices, and other factors.
9.23 As mentioned earlier, in 1979 the Accounting Research Centre conducted at our request, a survey of chartered accountants in New South Wales.44 Amongst other questions, the accountants were asked about the fees which they would charge for carrying out the kind of examination of solicitors’ trust accounts currently required by statute, and the fees which they estimated they would charge if conducting a more extensive examination of a kind described in the questionnaire. The latter examination was described as whatever would be deemed by the accountant to be necessary in order to be able to prepare an “audit report” stating whether
“ in my opinion based on my examination of the records produced to me by the solicitor and on the explanations and information given to me in response to the inquiries which I considered it necessary to make -
9.24 The Centre also conducted a survey of accountants in Queensland, and asked, amongst other questions, about their fees for conducting the kind of examination currently required in that State, which is defined generally by statute as an “audit” but is also required specifically to include certain types of test.46
9.25 In the light of the New South Wales survey, the Centre made a comparison between the fees which accountants would charge for the currently required examination, and the fees likely to be charged for an examination of the kind described in its questionnaire. The Centre found that for sole practitioners and firms with two or three partners the average fee being charged for accountants’ examinations was in the order of $200.47 For firms of four to nine partners the average cost was about $500, and for larger firms it was about $950.48 The Centre said that these fees “would on average, more than double” if the hypothetical type of examination was required, and that the increase “would be greatest amongst small firms.”49 It said that the anticipated fees for such an examination “were not markedly different” from those which its survey of Queensland accountants found were being charged for the audit required in that State.50
9.26 The Law Society has expressed some reservations about the accuracy of this attempt at costing.51 In particular, it has pointed out that no account was taken of the “value of the extra time of solicitors taken in complying with” the more rigorous requirements of the hypothetical examination described in the questionnaire.52
9.27 The Joint Committee of accountants has described the Centre’s estimate of the increase in costs as very conservative.53 The Committee emphasised the increased costs which might fall on sole practitioners, due to their inevitable lack of extensive systems for internal control. It said that for sole practitioners “the audit would need to be wider than for instance in a multi-partner firm, especially where accountants already prepared the partnership accounts or financial statements” for such a firm.54
9.28 There can be no doubt that a substantial increase in the rigour of the required accountants’ examination would also involve a substantial increase in the fees charged for such an examination on the other hand, for many solicitors, especially those in medium-sized or large firms, there would not be so substantial an increase in the total fees paid for accountants’ services. This is because, as the Accounting Research Centre’s survey demonstrates, much of the work likely to be involved in a more rigorous examination is already being carried out for some firms, whether or not at their request.55 Also, systems of internal controls in larger firms are likely to minimize the amount of additional work considered necessary by the examining accountant to comply with the more rigorous statutory requirements. Moreover, all solicitors are already required to keep such records as are necessary to enable their accounts to be “conveniently and properly audited”.56 Indeed our inquiries suggest that a considerable proportion (albeit perhaps a minority) of practices already have their trust accounts audited.
9.29 A number of other considerations need to be taken into account on the question of cost. First, there appears to be a broad measure of agreement, even within the Law Society, that the accountants’ examination requirements must be made more rigorous.58 Proposals presently under consideration by the Law Society59 seem likely to involve a substantial increase in costs, at least for those practices which currently go no further than the minimum type of examination required by statute.
9.30 Secondly, we have referred earlier to the very large amounts of trust money lost through defalcations in New South Wales.60 Reimbursement of these losses, and attempts to prevent further losses, cost solicitors almost $2 million each year through their compulsory contributions to the Solicitors’ Fidelity Fund, and an even larger cost is borne by the interest which is earned on clients’ trust moneys but not paid to them. The level of defalcations is so serious that it weakens the profession’s claim to retain existing monopolies (especially in the conveyancing area) and already has led to onerous and costly restrictions on solicitors’ activities, notably in relation to borrowing from clients and operating private finance companies.61
9.31 Thirdly, lawyers in every other State are subjected to more rigorous accountants’ examinations, with the consequential costs involved, than solicitors in New South Wales.62 Yet it is this State that has the worst record of defalcations. Moreover, people such as travel agents and stockbrokers in this State have to undergo, and pay for, much more thorough examinations than do solicitors.63
9.32 Fourthly, the introduction of more thorough and extensive supervision of solicitors accounts is likely in many cases to improve the general efficiency of their practice. For example, there is considerable evidence that many solicitors, especially perhaps in small practices, lose money by failing to record work accurately and to render bills promptly, and waste time and money through keeping office files and trust ledger accounts open much longer than is necessary. These inefficiencies and costs are likely to be reduced by more effective outside scrutiny of trust accounts and related office systems.
E. Other Considerations
Confidentiality
9.33 Solicitors are required to observe strict standards of confidentiality in relation to the business and personal affairs of their clients. If solicitors were required to give accountants more information than is necessary for an accountants examination of the kind currently required, it may be argued that the confidentiality of clients’ affairs is placed at undue risk. On the other hand, accountants already have access to highly sensitive material in solicitors’ trust accounts, and in other aspects of accountants’ practice (notably in relation to income tax returns) they commonly acquire information which their clients wish to remain confidential. Many solicitors already give accountants access to their office files and general accounts.
9.34 Accountants are well-versed in the need to preserve confidentiality and have formulated rules for that purpose, including rules relating specifically to auditing.64 We know of no significant incidence of complaints about breach of confidentiality by accountants, whether in New South Wales or in jurisdictions where more extensive access to solicitors’ records already occurs. The Law Society has stated its confidence that accountants are” as well able to respect.. confidentiality as solicitors”, but says that the public would have to be advised that material “previously reposed solely in their solicitors would thenceforth be available in confidence also to auditors with whom the clients had no dealings or personal aquaintance”.65
Law Society Inspections
9.35 We have referred earlier to the system of routine inspections by the Law Society’s Trust Account Inspectors, and have discussed some of the strengths and weaknesses of those inspections by comparison with accountants’ examinations, whether as currently required or of a more penetrating nature.66 These considerations have led some people to argue that the primary emphasis in reform of the present arrangements for independent scrutiny should be placed on more thorough and frequent inspections. The Law Society has taken this general view, although it is also considering improvements to the accountants examination requirements.67 Others, however, argue, amongst other things, that accountants’ examinations could have substantial advantages over inspections in some respects, at least if made more rigorous and independent Some point out that the system of inspections has already been built up further in New South Wales than in any other State, yet the level of defalcations in this State remains the worst and shows no sign of significant improvement.
III. SOME POSSIBILITIES FOR REFORM
A. Introduction
9.36 We have referred earlier, when discussing Law Society inspections, to a number of ways in which the current mixture of on inspections and accountants’ examinations could be altered.68 Insofar as the examinations are concerned, these possibilities include making them substantially more rigorous, leaving them largely unchanged, or abolishing them. We know of no-one who favours a fourth possibility, namely making them less rigorous.
9.37 Two of the first three possibilities mentioned above, namely abolition and no change, require no further description here. But it is appropriate to outline here some ways in which the examination could be made more rigorous. In this section we look briefly at five such ways, namely
- requiring the examination to constitute an audit;
- requiring the accountant to express opinions on certain matters of a general nature (such as whether the statutory provisions relating to trust moneys and accounts have been complied with);
- increasing the frequency of examinations;
- giving the accountant access to the solicitors other accounts and files;
- adding substantially to the number of specific types of check which must be undertaken as part of the examination
These measures are not, of course, mutually exclusive. As will appear from the following paragraphs, the principal possibilities under each of these heads can be identified largely by looking at the existing requirements in other Jurisdictions.
B. An Audit Requirement
9.38 One possibility is for the relevant statutory provisions to describe the required examination as an “audit”. This is the approach adopted in Queensland69, South Australia70, Victoria71, The Australian Capital Territory72 and NewZealand.73 It has also been adopted in New South Wales in relation to, for example, stockbrokers74 and real estate agents.75
9.39 We have discussed earlier the nature and scope of audits.76 It is clear that a requirement to conduct an audit would necessitate, and would be interpreted by accountants as necessitating, a much more rigorous examination than is currently required in New South Wales. Such a requirement, even if unaccompanied by more specific statutory requirements, brings with it a very substantial corpus of law, guidelines and customs in relation to auditing responsibilities and techniques. It would be impracticable to incorporate all or even most of this corpus in statutory provisions, but nevertheless it is of great significance and assistance to accountants. One way of emphasising its applicability would be to state specifically by statute, as has been done in Queensland,77 that the audit must be made in compliance with the current Statement of Auditing Standards and the Statements of Auditing Practice.78
9.40 On the other hand, there is no doubt that the conduct of audits involves considerable individual judgment by accountants.79 Different accountants may audit the same set of accounts in very different ways and with widely differing degrees of thoroughness. Moreover, the objectives and techniques for company audits, which are the types of audit with which the accounting profession is most familiar and the established principles are most concerned, may differ to some extent from those appropriate for solicitors trust accounts. In particular, company audits may be less concerned with detection of frauds or defalcations.
9.41 A further consideration is that if the requirement to conduct an audit is accompanied by more specific requirements concerning examinations of the accounts, in practice these other requirements may increase or reduce the degree of rigour of the examination. For example, if, as in Victoria, the principal requirement is to conduct “an audit made... in accordance with the [relevant statutory] rules”,80 some accountants may consider that compliance with specific requirements in the rules is sufficient, irrespective of whether they cover what accountants would usually consider necessary in an audit. On the other hand, if the specific requirements are appropriately drawn they can help to ensure that the desired degree of rigour in examinations is achieved.
C. Opinions on Matters of a General Nature
9.42 In most jurisdictions, irrespective of whether there is a requirement to conduct “an audit”, there are one or more matters of a general nature on which accountants are required to express an opinion in their report. For example, they may be required to give an opinion about whether the solicitor has complied with all relevant statutory provisions relating to trust accounts. In some instances, the requisite opinion may be such that the examination needs to be similar in nature and scope to that of an audit, whether or not there is an express audit requirement. We mention below some of the general matters on which opinions are required in certain jurisdictions. Before doing so, it should be pointed out that in some jurisdictions, but not most, the opinions are to be expressed as subject to a prescribed qualification. For example, in England81 and Tasmania82 the expression of opinion is prefaced by the words insofar as an opinion can be based on [the] limited examination” required by the relevant statutory rules.
Compliance with Statutory Provisions
9.43 One matter of a general nature upon which an opinion is commonly required (for example, in Victoria83 and South Australia)84 is whether or not the solicitor has “complied with the requirements of [the equivalent of our Legal Practitioners Act] and [the] rules relating to trust accounts”. There may be room for uncertainty about the extent to which such a requirement covers breaches of provisions relating to the handling, rather than the recording, of trust moneys. But in some jurisdictions, such as Queensland, there is a clear duty to report any breach of the provisions relating to handling.85 In New South Wales, by contrast, the corresponding requirement is to express an opinion about whether the “trust records are of the nature and in the form prescribed” and “appear to have been regularly written up and properly kept”.86 In other words, the required opinion seems to concentrate on the way in which the solicitor has recorded trust moneys, rather than including also the way in which they have been handled (in particular, whether section 4l(1) of the Legal Practitioners Act has been complied with). Moreover, there is no express requirement to give an opinion about whether, as required by section 42(2) of the Legal Practitioners Act, the accounts have been kept in such a manner as to “disclose the true position in regard [to the handling of trust moneys], and to enable the accounts to be conveniently and properly audited”.
9.44 In our Discussion Paper we suggested that accountants should be required to express opinions about whether the trust account records of the solicitor have been regularly and properly written up and whether the trust moneys handled by the solicitor have been properly accounted for, and also a final comprehensive opinion about whether the solicitor has complied with the statutory provisions relating to solicitors’ trust accounts.87 This suggestion was drawn largely from requirements in other jurisdictions and suggestions made to us by Coopers and Lybrand88 and the Accounting Research Centre.89 The Law Society is currently considering a proposal by its Chief Trust Account Inspector that accountants be required to certify whether or not “the trust account records have been regularly and properly maintained in the manner prescribed by the [Legal Practitioners] Act and Regulations” and “trust moneys handled by the solicitor have been properly accounted for and in accordance with the Legal Practitioners Act”.90
9.45 A general indication of the effect of changes along the lines we suggested may be obtained from the survey undertaken for us by the Accounting Research Centre. It asked chartered accountants in New South Wales, first, whether they currently undertake certain types of checks when examining solicitors trust accounts and, secondly, whether they would undertake those checks under a proposed requirement to state whether
“in my opinion based on my examination of the records produced to me by the solicitor and on the explanations and information given to me in response to the inquiries which I considered it necessary to make”91
The solicitor has complied with the principal statutory provisions (namely sections 41 (1) and 42(2) of the Legal Practitioners Act) relating to the handling and recording of trust moneys. The survey found the following comparisons:92
| | Percentage of respondents who “frequently” or “occasionally” undertake such checks currently | Percentage of respondents who would “frequently” or “occasionally” undertake such checks under the proposed requirement |
| | |
| Examine the solicitor’s general files | 27 | 98 |
| Examine the solicitor’s general ledger | 36 | 79 |
| Make a surprise visit | 11 | 60 |
| Obtain client confirmation of trust account balances | 11 | 74 |
| Check authorities for withdrawals from trust accounts | 35 | 90 |
| Sample trust account receipts | 53 | 96 |
| Check internal control system | 43 | 91 |
Adequacy of Accounting Systems
9.46 In some jurisdictions, such as Victoria, accountants are required to state whether, in their opinion the solicitors “accounting systems and records... are adequate having regard to the nature of the practice”.93 A provision of this kind helps to emphasise the educative and advisory role which many accountants regard as an essential part of an auditor’s abilities. The Law Society of New South Wales is currently considering a proposal by its Chief Trust Account Inspector that accountants be required to certify whether or not “the accounting systems and internal controls used by the solicitor to ensure that trust moneys handled by them have been properly accounted for were appropriate for the practice conducted by them and operated satisfactorily throughout the year”.
Other Matters which should be Reported
9.47 In several jurisdictions, such as Queensland95 and South Australia96, there is a general residual requirement upon accountants to report any other matter relating to the trust accounts which they consider should be communicated to the authority receiving the report.
D. Frequency of Examination
9.48 In some jurisdictions, solicitors are required to provide an accountant s report once each year. In Queensland, however, a report is required every six months and, in addition to an “audit” of the records at the end of the six-month period, the accountant must carry out an “unannounced examination” at least once during the period.97 The examination must, in effect, constitute an audit but there is no need to submit a report on it unless, broadly speaking, a breach of the law, an “ irregularity’, or a matter which “may adversely affect the financial position of the [solicitor] to a material extent” is discovered.98 In New Zealand, where the examination must constitute an audit, three examinations must be conducted each year, with one annual report being submitted to cover all three examinations.99 In Tasmania, an examination and report is required every six months.100 In Victoria, it is only necessary to submit one report each year, but during the year the accountant must make an unannounced visit to compare the balances in the trust ledger and the bank records.101
9.49 Unannounced visits are not required by statute in other jurisdictions, but some accountants would regard at least one such visit each year as being desirable and even at least where the statutory requirement is for “an audit”, obligatory. The Accounting Research Centre’s survey suggests that in New South Wales most accountants do not make an unannounced visit to solicitors’ offices.102 Moreover, in New South Wales the accountant who is to conduct the annual examination need not be selected until after the year in question has finished. This emphasises the lack of any requirement in this State for unannounced visits or any other sort of scrutiny during the year. By contrast, in most other jurisdictions the accountant, in effect, must be chosen and notified to the relevant authority at or before the commencement of the period to be reported upon.103 We consider this and other matters concerning the appointment of accountants in the next chapter.
9.50 It is relevant however, to reiterate here that in New South Wales every practice is to be inspected once each year by a Law Society Inspector. We know of no other jurisdiction except Victoria, where every practice is subjected to a Law Society inspection let alone to an inspection each year. Even in Victoria the inspection occurs only about every two years.104
9.51 An increase in the frequency of accountants examinations could be expected to increase the likelihood of effective prevention and detection of defalcations. On the other hand, of course, there would also be an increase in the accountants’ fees and perhaps in the degree of disruption of solicitors practices. Many of the benefits of more frequent examinations might be obtained by supplementing the annual full-scale examination with at least one brief and unannounced visit intended mainly to have a deterrent effect and to ensure that solicitors keep their records reasonably up-to-date. Another possible approach is to require more frequent examinations of particular types of practice and/or to meet some of the cost of additional examinations from the Fidelity Fund rather than leaving it to be borne entirely by solicitors. Bearing in mind the high incidence of defalcations amongst sole practitioners,105 there are strong arguments for subjecting them to more frequent scrutiny than other practitioners.
9.52 In our Discussion Paper we suggested that, generally speaking, the accountants examination should continue to be annual.106 We suggested, however, that each year there should also have to be at least two unannounced visits to every sole practitioner107 and at least one unannounced visit to every other practitioner.108
E. Access to Other Records and Files
9.53 A number of accountants (including our consultants Yarwood Vane,109 and Coopers and Lybrand110 have advised us that no audit or similarly rigorous examination can be conducted satisfactorily without having access to the solicitor s general accounts records and office files. The two principal associations of accountants have told us that in their view
“there is no reason precluding audits of solicitors’ trust accounts provided that the auditors have unrestricted access to all accounting records and related information including matter files, of the solicitors.”111
Access to these records is often essential in order to check transfers to the general account in respect of costs, or withdrawals of trust money for purposes of investment, both of which are areas which have given rise to considerable difficulties in New South Wales in recent years. We have recommended earlier in this Report that solicitors should be required to open an office file for every matter involving the handling of trust moneys, and should be required to retain it for at least 12 years.112
9.54 The Accounting Research Centre’s survey found that if the audit-like examination described in their questionnaires was introduced, 97 per cent of respondents to the survey would consider it necessary to examine solicitors office files, at least on occasion.113 In relation to examinations of general accounts the corresponding proportion was 79 per cent.114 It also found that under current arrangements, 37 per cent of accountants examined office files, and 48 per cent examined general accounts, whether frequently or occasionally.115 In other words, a substantial number of solicitors already provide accountants with access to these records on a voluntary basis.
9.55 An important issue arises in relation to the confidentiality of material to which accountants have access. Much of the material falls within the protection of legal professional privilege. This means that, unless the client consents, the solicitor cannot be compelled to disclose the information, even in legal proceedings. But if an accountant has access to it while examining the solicitor s trust accounts, he or she might be compelled to disclose it by, for example, being subpoenaed in legal proceedings. This could cause considerable unfairness to a client who, through no action of his or her owm may lose a basic protection upon which he or she relied when disclosing the information to the solicitor.
9.56 In a number of jurisdictions (including Queensland and South Australia) accountants conducting examinations have general rights of access to office files, general accounts records and other material held by a solicitor and relating to his or her practice and trust accounts.116 In some of these places,117 accountants are required to report whether or not they have been denied such access. In England, a solicitor can decline to provide such information on the ground of legal professional privilege, where applicable, but the accountant must mention any such instances in his or her report.118
9.57 In our Discussion Paper we suggested that accountants should have general access to office files, general accounts and other material whether of the solicitor’s practice or of a related service company.119 We suggested also that any information obtained by an accountant should continue to be protected by legal professional privilege, if applicable, save that it could be used in disciplinary proceedings against the solicitor if the relevant part of the proceedings was held in private.120 The Law Society has expressed no opposition to these suggestions121 and says that the suggested protection would be necessary. The Joint Committee of accountants said that general access of the kind we suggested is “essential ... for audit purposes”, and added that accountants should be required to state in their reports whether they have been denied access to any such material.122
9.58 It is relevant to note in this context that we have recommended earlier that a Direct Payments Register should be part of the trust account records,123 and we make recommendations later which would also give an accountant who is examining a solicitors trust accounts access to records of any nominee companies or private finance companies which the solicitor operates.124
F. Specific Checks
9.59 As we mentioned earlier, the report required from accountants in New South Wales states that certain checks of a relatively specific kind have been carried out.125 For example, it refers to checks of quarterly trial balance statements produced by the solicitor.126 In some other jurisdictions, however, there is a more extensive lost of specific checks which must be undertaken. This applies especially in Victoria, Queensland and England.
9.60 It is sufficient for the purposes of the present chapter merely to illustrate the types of specific checks which may be required. They include checking made from the trust account to the general account in respect of costs (as, for example, in England127 and Tasmania128), checking that bank reconciliations have been made each month (as, for example, in Queensland),129 and making a sample check of money paid to the general account in order to ascertain whether it should have been paid to the trust account (as, for example, in Tasmania).130 These and other specific checks are discussed in some detail in the next chapter.
IV. RECOMMENDATIONS
9.61 In our view, the present system of accountants’ examinations is manifestly and seriously inadequate. Many of its weaknesses are in its general nature, with which we are concerned in this chapter, while others relate to questions of specific technique or questions concerning the independence and training of the examining accountants, which we discuss in the next chapter.
9.62 The present requirements for accountants’ examinations concentrate on relatively few and unimportant matters of form and arithmetical exactitude, rather than on thorough investigations, albeit on a sampling basis, of particular transactions (especially in known problem areas) and of the practice’s financial control system. It is both remarkable and disturbing that, while New South Wales has a worse record of solicitors’ defalcations than any other State, it also continues to have the least rigorous requirements concerning accountants’ examinations. These examinations detected none of the 79 defalcations of which the Law Society became aware in the four years to 1984.131
9.63 The system of accountants’ examinations has been criticised trenchantly by eminent accountants, including the New South Wales Auditor-General, as being not only vague and superficial but also potentially misleading to clients, who may erroneously believe that their money is subject to independent scrutiny akin to that of an audit. We agree with the general tenor of their views and with many of their specific criticisms. We note also that the Law Society of New South Wales appears to accept that the present examination requirements need substantial change.
9.64 The Joint Committee of the two principal associations of accountants in New South Wales has expressed the view that “there is no reason precluding audits of solicitors’ trust accounts provided that the auditors have unrestricted access to all accounting records and related information including matter files, of the solicitors”. It added that “so far as we are aware, the Queensland legislation [concerning audits of trust accounts] appears to have operated satisfactorily and may be a suitable model.”132
9.65 We are convinced that accountants’ examinations should be required to be much more rigorous than at present. The question then arises whether they should have to constitute an audit, as is the case, for example, in Queensland, Victoria, South Australia, the Australian Capital Territory, and New Zealand. Audits are already required for the trust accounts of some professional groups in New South Wales, including stockbrokers, real estate agents and travel agents. But the examinations could be made very rigorous and demanding without being described as an audit; this has been achieved, for example, in England, Tasmania and Ontario by listing some general requirements which the examination must meet and some specific checks which it must include.
9.66 As we noted earlier,133 the use of the term “audit’ carries with it a substantial corpus of legal principles, formal Statements of Auditing Standards and Auditing Practices, an extensive body of auditing literature, and many customs and connotations with which accountants are generally familiar. Not all of this corpus is relevant to the auditing of solicitors’ trust accounts but much of it is, and is of great value in providing definition and guidance for both accountants and lawyers about specific requirements and techniques. It would be impracticable and unwieldy to attempt to express in statutory form more than a very small portion of this corpus. There is no doubt that, as in Jurisdictions to which we have referred earlier, an examination of considerable rigour (broadly akin to that of an audit) can be defined by compiling an extensive statutory list of requirements even though the term “audit’ is not used. However, while the general rigour of an audit may be matched, the breadth of specific definition and guidance cannot.
9.67 In the light of these considerations, we conclude that the term audit should be used as the principal definition of the required type of accountants’ examination. In addition however, we believe that there are advantages in specifying particular standards to be applied, purposes to be pursued, techniques to be adopted, and items to be included in reports. A number of the more specific requirements of this kind are considered in the next chapter. Here we confine ourselves to requirements concerning the general nature of the examination.
9.68 The introduction of an audit requirement would involve many solicitors paying appreciably more in accountants’ fees than at present. On the other hand, if the current level of payments from the Fidelity Fund could be reduced in this State to the same level per solicitor as in. say, Victoria or Queensland, the recent substantial increases in compulsory contributions from solicitors could be reversed dramatically.134 Moreover, the cost of audits is already being borne by solicitors in most other parts of Australia (and by members of other professions in New South Wales), yet it is solicitors in this State who have the worst record of defalcations.
9.69 Considerations of cost are, however of crucial significance to the question of frequency of audits. In the light of these considerations, and the fact that each practice is to be subject to an annual Law Society inspection, we believe that it would not be Justified, at least under present circumstances, to require more than one audit each year.
9.70 On the other hand, it is most important that accountants should play a continuing role in prevention education and detection in relation to practices which they are responsible for auditing, rather than being involved only for a very brief period after the end of the year to which the audit relates. This approach requires changes in the procedures for appointment of accountants as auditors, which we discuss in the next chapter, but is also leads us to believe that it should be mandatory for accountants to make at least one unannounced visit each year. The visit should not involve anything approaching a full audit, unless the accountant discovers serious grounds for concern Its principal aim would be to ensure that accounting records are being kept in the correct manner and are reasonably up-to-date, and to conduct simple checks for manifest errors such as debit balances or lack of agreement between trust ledger records and bank records.
9.71 For these and other reasons explained earlier in the chapter, we recommend that solicitors’ trust accounts should have to be audited each year. Without limiting the generality of that requirement, a number of other requirements of a general nature should be specified by statute. We list these requirements in the following paragraphs.
9.72 First, the principal purpose of the audit should be defined as the detection of frauds, defalcations, illegalities and irregularities. This would not mean, however, that accountants would have to give an opinion that no fraud etc. has taken place, nor that an accountant who acted with all reasonable care and skill would nevertheless be liable for failing to detect, for example, a well-concealed defalcation.
9.73 Secondly, the audit should have to be conducted in accordance with the current Statements of Auditing Standards and Auditing Practice published by the Institute of Chartered Accountants in Australia and the Australian Society of Accountants.
9.74 Thirdly, accountants conducting these audits should be required to state in their report whether, based on appropriate examination and sampling techniques, they are of the opinion that throughout the period covered by the report
- trust moneys have been handled in accordance with the relevant statutory provisions (i.e., at present, section 41 of the Legal Practitioners Act);
- the proper accounting records have been kept, and all trust moneys have been recorded and accounted for, in accordance with the relevant statutory provisions (i.e., at present, sections 41 and 42 (2) of the Legal Practitioners Act, and the Solicitors’ Trust Account Regulations).
This would mean, amongst other things, that an opinion would have to be given about whether, as required by section 42(2), the records have been kept “in such a manner as to disclose the true position in regard [to the trust moneys] and to enable the account to be conveniently and properly audited”.
9.75 Fourthly, accountants conducting such audits should also be required to report
- whether, in their opinion, the practice’s accounting and financial control systems are adequate for a practice of its particular nature;
- any other matter which they consider should be brought to the attention of the Law Society.
9.76 Fifthly, accountants responsible for auditing a practice should be required to make at least one unannounced visit (or, in the case of sole practitioners, at least two such visits) to inspect the practice’s accounts during the period covered by the annual audit, with the principal purpose being to form an opinion whether, based on limited sampling not amounting to an audit, the accounting records are being kept in the required form and are reasonably up to date, there are no debit balances in the trust ledger, and the prescribed trial balance statements have been properly prepared. This opinion should be stated subsequently in the annual audit report, but if the accountant detects any material irregularity or breach of the law it should have to be reported forthwith to the Law Society. We make a further recommendation in chapter 10 relating to accountants’ duties to report reasonable suspicions which they may form about irregularities of certain kinds.135
9.77 Sixthly, for the purposes of conducting an audit, accountants should have access not only to the trust account records but also to office files, general accounts and all other documents relating to the practice, and should be entitled to require the solicitor to provide such other information as is reasonably necessary for the purposes of the audit. If an accountant seeks access to such material or information and is refused, he or she should have to mention the refusal in the audit report. Information covered by legal professional privilege should retain that protection despite disclosure to the accountant, except where it is to be given in private session in the course of disciplinary proceedings against the solicitor.
FOOTNOTES
1. Letter to the Commission dated 9th June 1980, p.1.
2. Id., p.2.
3. University of Sydney Accounting Research Centre, “Report on Regulation 8 of the Legal Practitioners Act (1979), p.1.
4. Id., p.3.
5. Id., p.1.
6. See paras.9.10-9.15 below.
7. See “Theoretical Issues and Practical Methods of Auditing Solicitors’ Trust Accounts” (a Consultants Report to the Commission, 1979), esp. at pp.18-19. The report is re-printed in our Background Paper V (1981).
8. Id., p.20
9. Law Society’s Response, para.4.2; Joint Committee Report, para.3.
10. See para.7.5 above.
11. See Law Society’s Response, esp. paras.5.3,5.8; and see paras.9.44 and 9.46 of this Report.
12. Joint Committee Reply, paras.4.21; and letter to the Commission from Mr. W.E. Small, State Chairman, Institute of Chartered Accountants, dated 9th June 1983.
13. Letter from Mr. W.E. Small (State Chairman, Institute of Chartered Accountants) and Mr. I.C. Matheson (State President, Australian Society of Accountants) to the Law Reform Commission dated 1st August 1983. See also para.9.64 below.
14. “A Report of an Enquiry into the Certification by Accountants of Solicitors’ Trust Accounts” (1980), hereafter referred to as “Accounting Research Centre Report”. The Report is reprinted in our Background Paper V.
15. Id., p.7.
16. Id., p.8.
17. Id., p.9.
18. Id., p.10
19. “Theoretical Issues and Practical Methods of Auditing Solicitors’ Trust Accounts’ (1979), pp.3-4.
20. International Federation of Accountants, “International Auditing Guideline No.l: Objectives and Scope of the Audit of Financial Statements” (1980), paras.7-9.
21. See Australian Society of Accountants and the Institute of Chartered Accountants in Australia, Australian Accounting and Auditing Standards and Related Statements (1983), pp.2001-2008.
22. Id., pp,3001-3166.
23. Id., p.2004.
24. Ibid.
25. Id., p.2001.
26. Ibid.
27. Ibid.
28. Id., pp.2001-2008.
29. Id., pp.3001-3166.
30. See eg. Re Kingston Cotton Mill Co. (No.2) [1896] 2 Ch. 279; Re London & General Bank (No.2) [1895] 2 Ch. 673; Re Thomas Gerrard & Sons Ltd. [1968] CL 455; Pacific Acceptance Corporation v. Forsyth [1970] 92 W.N.(N.S.W.) 29; and Re Gerughty [1983] Qd R29, which related to audit of a solicitor’s trust account.
31. Companies (New South Wales) Code, s.285(3)(a)(i).
32. Id., s.285(4).
33. Legal Profession Practice Act 1958, s.81A.
34. Special Committee to Consider the Provisions of the Legal Profession Practice Act Referring to Auditing and the administration of the Solicitors Guarantee Fund, Final Report (1977), p.7 (hereafter called the Dawson Committee Report).
35. See note 9.12.1 above, at pp.3127-3134.
36. Id., pp.3129-3130.
37. Discussion Paper, para.6.71.
38. Joint Committee Reply, para.6.
39. Mr. O’Donnell was a member of the Committee at the time, and subsequently became its chairperson.
40. Letter to the President of the Australian Society of Accountants dated 14th February 1981.
41. Ibid.
42. Ibid.
43. Standing Committee of the Law Institute of Victoria and Institute of Chartered Accountants in Australia and the Australian Society of Accountants on the accounting Provisions of the Legal Profession Practice Act and Solicitors”(Audit and Practising Certificates) Rules, Report (1976), P.1.
44. See para.9.8 above.
45. Accounting Research Centre Report, p.11.
46. See paras.9.38, 9.39, 9.48, 9.56, 9.59, 9.60, 10.25 below.
47. Accounting Research Centre Report, p.18 and Graphs.
48. Ibid.
49. Id., p.4.
50. Ibid.
51. Law Society’s Response, paras.5.4 and 5.6.
52. Id., para.5.4(d).
53. Joint Committee Reply, para. 18.
54. Ibid.
55. See para.9.8 above.
56. Legal Practitioners Act 1898, s.42(2).
57. According to estimates obtained by the Law Society.
58. See paras.9.4-9.7 above.
59. See note 9.7 3 above.
60. See chapter 2 above.
61. See chapter II below.
62. See later in this chapter, and chapter 10.
63. See, e.g., Travel Agents Act, 1973, s.42D(2), and Travel Agents Regulations, Form 25; Auctioneers and Agents Act, 1941, s.38D; Securities Industry (New South Wales) Code, s.75, and Sydney Stock Exchange Rules, r.3(6)-(10).
64. See Statement of Auditing Standards (note 9.12.1. above), p.2007.
65. Law Society’s Response, para.5.7.
66. See chapter 8 above.
67. See note 9.7.1 above.
68. See paras.8.14-8.15 above.
69 .Trust Accounts Act 1973, s. 16(2)(b).
70. Legal Practitioners Act 1981, s.13.
71. Legal Profession Practice Act 1958, s.81.
72. Legal Practitioners Ordinance 1970, s.58.
73. Law Practitioners Act 1982, s.91: Solicitors Audit Regulations, 1969, reg.20.
74. See note 9.31.2 above.
75. Auctioneers and Agents Act, 1941, s.38D(2).
76. See paras.9.10-9.21 above.
77. Trust Accounts Act 1973, s.16(11); Trust Account Regulations 197 3, reg.7.
78. See paras.9.12-9.1 3 above.
79. See para.9.11 above.
80. Legal Profession Practice Act 1958, s.81A(l).
81. Accountant’s Report Rules, 1975, Schedule.
82. Rules of Practice 1977, Schedule.
83. Solicitors (Audit and Practising Certificates) Rules, 1965, r.16, Form 2.
84. Legal Practitioners Regulations 1982, reg.48.
85. Trust Accounts Act 1973, s.17(b).
86. Solicitors Trust Account Regulations, Form 1.
87. Discussion Paper, paras.6.75-6.76.
88. Ibid., and see our Background Paper V, p. 104.
89. See our Background Paper V, p.13.
90. Information supplied by the Law Society to the Commission.
91. Accounting Research Centre Report, p.11.
92. Id., p.13.
93 .Solicitors (Audit and Practising (certificates) Rules 1965, Form 2, para.7.
94. Information Supplied by the Law Society to the Commission.
95. Trust Accounts Regulations 197 1, reg. 11(14).
96. Legal Practitioners Regulations 1982, reg.50(1).
97. Trust Accounts Act 197; ss.16, 18.
98. Id., ss.17, 18; Trust Accounts Regulations 1973, reg.8.
99. Solicitors Audit Regulations, 1969, regs.47-48.
100. Rules of Practice 1977, r.10.
101. Solicitors (Audit and Practising Certificates) Rules, 1965, Form 2.
102. Accounting Research Centre Report, p.11.
103. See paras. 10.40, 10.41 below.
104. Information provided by the Law Institute of Victoria at the request of the Commission.
105. See para.2.25 above.
106. Discussion Paper, paras.6.63, 6.76.
107. Id., para.7.3.
108. Id., para.6.76.
109. See their report to the Commission published ill Our Background Paper V, at p.141.
110. See their report to the Commission published in our Background Paper V at p 80.
111. See note 9.7.5 above.
112. See para.6.11 above.
113. Accounting Research Centre Report, pp.11-13.
114. Ibid.
115. Id., p.10.
116. See, e.g., Legal Practitioners Act- 1981 (S.A.), s.35(l), and Legal Practitioners Regulations 1982, reg.48(2); Trust Accounts Act 1973 (Qld.), s.16(8) and (9).
117. See, e.g., Legal Practitioners Regulations 1982 (S.A.), reg.50(t)(c); Trust Accounts Act 1971 (Qld.), s.16(10).
118. Accountants Report Rules 1975, r.5.
119. Discussion Paper, paras.6.79-6.85.
120. Id., para.6.82.
121. Law Society’s Response, para.5.15.
122. Joint Committee Reply, para.17.
123. See para.4.36 above.
124. See chapter 11 below (esp. paras.11.35, 11.60 and 11.62).
125. See para.7.18 above.
126. Solicitors Trust Account Regulations, Form 1.
127. Accountant’s Report Rules, 1975, r.4(l)(d)
128. Rules of practice 1977, r.10(3)(d).
129. Trust Accounts Regulations 1971, reg. 11(11).
130. Rules of Practice 1977, r.30(3)(h).
131. See para.7.8 above.
132. See note 9.7.5 above.
133. See para.9.39 above.
134. See paras.2.19, 2.20 above.
135. See paras. 10.67-10.79.
