3.5 Accountabilities and Audits
It is important to give yourself some lead-time to set up a trust account before you expect to use it for your first transaction. It is not as simple as opening a bank account and issuing a trust cheque that same morning.
Before you can open a trust account, you must be approved as the Responsible Lawyer for your firm. You must apply, complete the Responsible Lawyer course and be approved so please factor the timing of this process in when you are preparing to open your own firm.
According to Rule 119.1, if you are setting up your own practice, you must file either
- an application to be approved as a Responsible Lawyer and to operate a trust account or
- an application for exemption from the requirement to operate a trust account.
You must maintain at least one pool trust account and at least one general account, both in the name of the law firm, unless exempted from the requirement to operate a trust account (Rule 119.16).
The Responsible Lawyer is accountable for
- assessing risks,
- any tasks delegated to others,
- establishing appropriate internal controls and
- monitoring internal controls and providing a certificate to the Law Society annually as to the effectiveness of those controls.
The Responsible Lawyer is also accountable for the accuracy and timeliness of all reports and filings and for the monthly trust and general bank reconciliations.
Lawyers must pass the Responsible Lawyer Course in order to be approved as a Responsible Lawyer and can re-take the course whenever they want to refresh their understanding.
While each firm will have one Responsible Lawyer who is accountable for certain functions, every lawyer who is in charge of a matter has trust account responsibility for that matter.
This is why all lawyers must understand the trust fund accounting Rules, the Rules associated with protecting trust funds and property and be aware of the controls that must be in place to protect trust money and property. You can rid yourself of trust obligations for unclaimed trust funds by paying them to the Law Society (section 117(1) of the Legal Profession Act and Rule 119.27, the Rules of Law Society of Alberta).
Law firms operating trust accounts must either submit trust accounting and billing data to the Law Society electronically or file an Accountant’s Report. They also must file the annual Self-Report regardless of whether they file an Accountant’s Report or download data through an authorized software program.
Law firms operating a general bank account only are also required to complete sections A and B of the annual Self-Report. Please refer to Module 4 for details on report filing.
The Law Society performs audits and investigations. Audits can be risk-based, based on the upload of accounting records, or rotational. If you upload your trust accounting data electronically, you may be subject to a rotational audit less often.