Below are some common questions in relation to completing Form 3 Accountants Report for brokerages involved in property management.
Q: There are 40 trust accounts, do I have to review them all?
A: For Q1 all of the appropriate bank statements, bank reconciliations and liability reconciliations for each trust account for each month of the period of the examination, must be reviewed. It can not be done on a sample basis. For Q4 and Q5 all 40 must be reviewed for the sample month.
Q: When there are apartments or condominium corporations how many receipts do I have to test?
A: For Q3 where there is more than one receipt for any of the properties selected in the sample month, all receipts for the property to a maximum of three should be tested.
E.g.: If there are 40 apartments and condominium corporations being managed then the sample size will be 10 of the apartment or condo corporations and then 3 receipts for each apartment or condominium corp. This would give a total of 30 receipts.
This will be the sample size used for Q3, Q7, Q8 and Q9.
Q: If there are trust accounts for individual owners / properties, what is the trust liability?
A: Where the account is a single account for an owner or property, the liability will usually be the bank account ledger balance for the account in the accounting records.
Therefore, Q1 b) and Q5 will not be applicable.
Q: If there are trust accounts for individual owners / properties, what is the trust ledger for Q1 and Q7?
A: Where the account is a single account for an owner or property, the trust ledger will be the bank account ledger for the owner or property in the accounting records.
Q: For Q8, do I have to find disbursements relating to the same units that were in my Q3 sample?
A: No; when testing disbursements from an apartment or condo corporation, the disbursements do not have to relate to the individual units that were tested in Q3. They just have to relate to the same property.
Q: What account should I test for Q9?
A: A brokerage should have a general account into which its management fees are deposited. This procedure is to be carried out on the brokerage general account to test if there were any deposits that should have been deposited into a trust account or disbursements that should have been made from a trust account, that have been made through the general account.
Q: There are 40 trust accounts, do I have to review them all?
A: For Q1 and Q12 all of the appropriate bank statements, bank reconciliations and liability reconciliations for each trust account for each month of the period of the examination, must be reviewed. It can not be done on a sample basis. For Q4, Q5 and Q13 all 40 must be reviewed for the sample month.
Q: When there are apartments or condominium corporations how many receipts do I have to test?
A: for Q3 where there is more than one receipt for any of the properties selected in the sample month, all receipts for the property to a maximum of three should be tested. e.g.: If there are 40 apartments and condominium corporations being managed then the sample size will be 10 of the apartment or condo corporations and then 3 receipts for each apartment or condominium corp. This would give a total of 30 receipts.
This will be the sample size used for Q3, Q9, Q10 and Q15.
Q: If there are trust accounts for individual owners / properties, what is the trust liability?
A: Where the account is a single account for an owner or property, the liability will usually be the bank account ledger balance for the account in the accounting records.
Therefore Q5. and Q7. will not be applicable.
Q: For Q 10. Do I have to find disbursements relating to the same units that were in my Q3 sample?
A: No when testing disbursements from an apartment or condo corporation, the disbursements do not have to relate to the individual units that were tested in Q3. They just have to relate to the same property.
Q: If there are trust accounts for individual owners / properties, what is the trust ledger for Q11?
A: Where the account is a single account for an owner or property, the trust ledger will be the bank account ledger for the owner or property in the accounting records.
Q: What account should I test for Q15?
A brokerage should have a general account into which its management fees are deposited. This procedure is to be carried out on the brokerage general account to test if there were any deposits that should have been deposited into a trust account or disbursements that should have been made from a trust account, that have been made through the general account.
