Audit preparation is important, especially for new law firms on the block.
Each year roughly 25 per cent of all legal practitioners in Ontario will be subjected to varying degrees of auditing conducted by Law Society of Upper Canada (LSUC) officials who are attempting to boost practice management compliance among lawyers in the province.
While most of the auditing taking place is done at random, LSUC indicates there’s a list of other criteria auditors take into consideration when deciding which lawyers will be observed in any given year.
Newly-formed law firms are often targeted by auditors so that record-keeping practices and procedures are properly adhered throughout the lifetime of the firm. This means that law firms that are audited one year are likely to be “followed up” in future years to see if inadequacies were properly remedied after preliminary observation of a firm’s bookkeeping.
This is why it is especially important for young firms and new lawyers to maintain an even footing in the early stages of their career when it comes to practice management and legal accounting. There are many ways this can be done, with varying amounts of effort involved.
Generally speaking, Lawyers have roughly one of five groups to choose from when it comes to the different styles of accounting systems available:
Manual Double Entry - a simple, inexpensive method of data entry and storage that is time consuming and prone to arithmetic errors.
One Write - Another, simple, cheap method that posts to sub ledgers. Of course, this method is also time consuming -- particularly if there’s a lot of data being used. Similarly, this method is prone to mistakes being made.
Spreadsheet Software - A common choice, spreadsheets are cheap & have the added benefit of automatic calculations, limiting the volume of arithmetic errors present in bookkeeping. Errors take place, though, mostly due to formulae. Problems can also be difficult to detect by users.
General accounting software - This method has a lot of benefits, such as automatic calculations, ledger subledger posts, final report production, etc. But this software isn’t designed for the intricacies of trust accounting, nor is it particularly easy to use; so it often requires training. It’s also expensive.
Legal accounting software - This style of accounting for lawyers has all the benefits of general accounting with the added benefit of being geared specifically for the demands of lawyers. The only problem is that many types of legal accounting software do not come with practice management parameters, meaning you’ll often require a second piece of software. This is not the case with uLaw Practice, because our software includes practice management and legal accounting together in an all-inclusive suite that also provides training.
New lawyers and young firms would do well to consider one of the five options and to perfect their bookkeeping in an effort to be prepared when the auditor starts knocking at the door.
Tags: Audit preparation