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Conducting trust account audits under the Agents Financial Administration Act 2014

This page only applies if you are an auditor who conducts trust account audits under the Agents Financial Administration Act 2014.

This Act refers to audits of trust accounts operated by individuals and corporations who work as:

  • real estate agents
  • resident letting agents
  • auctioneers
  • chattel auctioneers
  • motor dealers (who sell used vehicles on consignment)
  • debt collectors (who collect debts on behalf of someone else).

Debt collectors may be licensed field agents or collection agents (who do not need a licence).

Auditing standards

You are expected to perform the audit of trust accounts in accordance with the standards required by your professional body. You are also expected to provide the completed audit report to your client in a timely manner.

Unannounced examinations

An audit period usually lasts for 12 months. You must conduct 2 unannounced examinations of the trust account/s during this time.

These examinations cannot:

  • take place within 2 months after the last day of the audit period
  • be less than 2 months apart.

For some reasons, an audit period may be shorter than the usual 12 month period. You must still make at least 1 unannounced examination in an audit period of over 6 months.

Irregularities

If you detect a serious irregularity with a trust account, you must immediately report it to us. Additionally, all irregularities should be detailed in the annual audit report.

Cessation of audit appointment

You and the agent or dealer must each immediately notify us when your auditor appointment ends and explain the reasons why it ended.

Penalties

We can penalise you if you fail to satisfactorily perform your auditor functions, do not immediately report a serious irregularity with a trust account or fail to notify us of the end of your appointment. Penalties may include:

The audit report

You must complete the annual audit report in the prescribed format. It needs to include:

  • your name
  • your professional body and member number
  • the name of the agent or entity operating the trust account and their business address
  • their licence number (unless they are a collection agent)
  • the audit period
  • the name and number of each trust account
  • the financial institution that holds their trust account (or accounts)
  • the serial numbers of all trust receipts (both unused and used)
  • the accounting software used (tell us the name and version number)
  • the registered business name and the name of all business associates
  • details of all overdrawn trust bank accounts and trust creditor ledger accounts, including:
    • account name (or names)
    • date (or dates)
    • amount (or amounts) involved
    • explanations given
    • corrective action taken
  • a copy of the reconciliation of the trust account cash book and the trust bank account and trust ledgers as at the last day of the audit period.

For a corporation you must also include the licence number of each licensee and agent in charge.

You will also need to make a statement about:

  • whether the agent has kept each trust account satisfactorily
  • when each unannounced examination took place
  • what results came from each unannounced inspection
  • whether you also audited the agent's general account
  • whether for each month of the audit period the trust account cash book and the trust bank account and trust ledgers were reconciled
  • whether an analysis was made of the name and amount owed to each trust creditor
  • whether any amount was held in the trust account for more than 3 months and the reasons given
  • anything else that should be reported.

You can lodge a trust account audit report online.

Appointments

The agent and client will negotiate the terms of the agent's appointment at the time the appointment is made. The appointment must be made in writing using the specified appointment form.

The terms of appointment are to specify:

  • the name and licence number of the agent or dealer
  • when each party can access and use their share of income
  • when the agent or dealer can collect management fees and other charges.

Pre-drawn commissions/unauthorised withdrawals

Disbursements from trust accounts to clients usually take place on a monthly basis. They may be more frequent, such as bi-monthly, if agreed.

An agent or dealer must not withdraw their commission and fees from the trust account until after they have made all other payments relevant to the performing of the service earning them commission or fees. They must also only withdraw money for an authorised purpose.

Breaches

An agent or dealer may be in breach if they withdraw trust money from their trust account:

  • before the authorised time
  • for an unauthorised purpose.

For example, they must not pay trust money to their general account before finalising all other payments (pre-drawing).

These are serious breaches.

A breach might be against the following sections of the Agents Financial Administration Act 2014:

  • Section 20 (trust money not available to licensee’s creditors)
  • Section 21 (when payments may be made from trust accounts)
  • Section 22 (permitted drawings from trust accounts)

Charging more for expenses than actually incurred

An agent or dealer must disclose to their client if they derive a benefit from charging expenses to an owner. Generally, this is when they charge the client more than the actual expense amount.

For example, if the agent or dealer is a resident letting agent this may be for a range of services, such as:

  • linen
  • cleaning
  • pay TV.

Terms

The agent or dealer and their client will negotiate these terms at the time of making the appointment. For all expenses, the agent or dealer must disclose to their client if they receive any:

  • rebates
  • discounts
  • commissions
  • other benefits from performing a service for their client.

Failing to comply with the terms of their appointment may result in breaches of the following sections:

  • Section 23 of the Agents Financial Administration Act 2014 (Accounting to clients)
  • Section 89 of the Property Occupations Act 2014 (Restriction on recovery of reward or expense—no proper authorisation etc)
  • Section 90 of the Property Occupations Act 2014 (Restriction on recovery of reward or expense above amount allowed)

The completed audit report

Once it’s complete, you must:

  • sign the audit report
  • give an original copy of the report to the agent or dealer.

If you lodge the audit report online, you can download a copy of the lodgement receipt and save it and/or email it to the licensee.

Lodgement

Although the agent or dealer always remains responsible for lodging the audit report, either you or the agent or dealer may lodge it with us.

Last updated:
24 October 2023
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