A practice review is an examination of records and activities to ensure compliance with statutory obligations. Sometimes it results in recommendations for changes in control, policy, and procedures.
Simply put, it’s a form of audit of a brokerage’s accounting and record keeping, record completeness, and trust account practices.
Effective March 1, 2022, RECA will again be scheduling in-person practice reviews, where possible.
Download the guides on practice review for more information:
RECA recognizes that undergoing a trust assurance and practice review can be a stressful experience and has adopted the following policies to make the process as positive as possible.
RECA surveys brokers after the completion of a review. Results indicate the Practice Review program has been meeting these objectives.
Brokerages are selected for practice reviews according to any of the following criteria:
RECA will also conduct educational reviews for new brokers. This review is an resource to help ensure new brokers are aware of the provisions of the Real Estate Act as it applies to brokerage accounting. An auditor will review the trust account reconciliation process, accounting practices and, if necessary, assist you in making changes to ensure compliance with the Act. Contact the practice review unit to schedule your educational review for the next time an auditor is in your region.
RECA will normally contact the broker in advance and will be flexible in scheduling. In remote locations, there may be less flexibility in scheduling.
We will make reasonable efforts to allow brokers to continue with normal business activities while we complete the practice review.
We complete most reviews in one day; however, this may vary depending upon the complexity of the brokerage’s operations and the quality of record keeping. Property management reviews often take longer than one day when there are a large number of accounts to review.
We will make an effort to not conduct a review during the year-end report process.
Your auditor will provide a list of documents they require. If your brokerage keeps your records at the brokerage office, little or no preparation should be required.
The person who maintains the accounting records must attend the review. We do not require the presence of the broker, but many brokers find the process educational when they attend.
The auditor briefly discuss brokerage’s activities, policies, and procedures with the broker prior to beginning a review.
The review may involve any or all of the following:
In property management reviews, in addition to the above the auditor will select a sample of properties for detailed testing, including a review of management agreements, leases, and invoices paid on behalf of the properties.
In condominium management services reviews, in addition to the above the auditor will review Condominium Corporation bank accounts. They will also select a sample of properties for detailed testing, including a review of management agreements and invoices paid on behalf of the condominium corporations.
In mortgage broker reviews, in addition to the above, where applicable, the auditor will select a sample of administered mortgages for detailed testing, including a review of the administration agreements and investor and borrower files. Where investors’ funds are received, the auditor may review investor, borrower, and loan files, including cost of credit disclosure schedules and lender/investment disclosure statements.
Auditors can only review records for the past three years. However, the review will usually cover the period from the last accountant’s report (for a new brokerage, from the start of business), or other review start date as indicated at the time of notice, to the present date.
All brokerages must maintain adequate books and records and comply with all areas of the legislation, whether trust funds are held or not. For these brokerages, the auditor may still review:
TIP: Auditors find minor breaches of the Real Estate Act or the Rules in nearly all reviews, but seldom refer the matter to the Investigations teams. This referral happens for serious cases only. For minor breaches, the auditors will make suggestions on how to change policy or procedure to come into compliance.
The auditor will use the following criteria to determine if they should send files to RECA’s Investigations’ team: