The video provides a step‑by‑step guide for legal bookkeepers on how to support attorneys when a state bar audit is initiated—whether random or complaint‑driven. It explains the high stakes for lawyers, outlines the ethical and compliance obligations of the bookkeeper, and details concrete processes: maintaining flawless trust‑account records, performing monthly three‑way reconciliations, using a client‑and‑matter ledger hierarchy (as exemplified by LeanLaw), completing bar‑provided forms exactly as required, organizing bank statements and check copies in a digital filing system, and proactively communicating with the attorney through pre‑audit meetings and regular updates. The speaker stresses the importance of thorough documentation of any corrections, transparent note‑taking, and the bookkeeper’s role as an emotional support partner. Practical tips for external bookkeeping firms and a mention of a “Law Lab” resource conclude the presentation.
Chapters
This is a fun topic, but not fun for the attorneys. So we're gonna talk a little bit about what happens when your attorney-client gets that awful letter that says they're either randomly being audited or they're being audited because of someone saying something was inappropriately done at the firm. So as a legal bookkeeper, you play a critical role in helping the attorney through navigating this high-stake, process of a bar audit. Bar audits are conducted by the State Bar Association and they are going to scrutinize your records. So know that you have to follow the ethical and compliance standards of the state that the lawyer practices law. These audits are extremely stressful for the attorney. I can tell you that even if they're random, you know, any discrepancy can jeopardize their license to practice law. And that's terrifying. Yeah. I mean, mostly you're really not looking at a really bad infraction if it's not being done inappropriately. You will get a slap on the wrist. You might have to go into what we call bar jail and have to have somebody really scrutinize their records, but know that it's really frightening for them. And this is where you come in as the legal bookkeeper to shine and show that you've got the books ready and that everything's in compliance and then you're here to help. So the first tip on doing any of this kind of work is to maintain impeccable trust account records year-round. Don't let them get away from you. This is extremely important that you reconcile monthly, that you put that 3-way bank reconciliation together monthly, that you maintain a separate ledger for each client so that you're able to pull up at any given time a specific balance to show the bar what the balance was on a specific date, which is why we like to use that ledger system of— Mm-hmm. And so what LeanLaw does automatically, it does the liability account, funds held in trust, and then the sub-account would be your client, and then your sub of that is your matter. Those ledgers you'll be able to pull out of the liability account are really important. So if the auditor requests an account reconciliation, you wanna be able to provide that report. They might say, look, I wanna see the account reconciliation as of April 2025. You wanna be able to pull up that detailed register. You want to know that at the end of April it was $10,567.27, and you want to be able to show the auditor that you know exactly what each person had that equals that total. Now, a lot of the auditors are going to ask you for reports, and they're going to give you forms, or they're going to give your attorney forms. It's going to come in a mailing, probably. It's probably not going to be online. You can request it online. Know that you— or a fillable PDF. Know that you're going to have to really recreate, and hopefully it's not a really large firm, recreate these ledgers in the format that the bar is requesting. Don't just go, oh, that's just a— that's just in my QuickBooks. I'm just going to shoot off a register out of QuickBooks and give that to the, to the bar and think they're going to accept that. They don't. You need to use their forms. It's so important. If you don't use their forms, they're going to kick it back and your poor client is going to be sitting there with a problem that it's not set up properly. So you really need to make sure that you do it the right way so you're not pissing off the bar and you're keeping client out of trouble, and they're going to be very, very happy that you took care of them. And this fact that you're making sure that you're giving the bar exactly what they asked for, that's important. You want to organize any financial documents in advance, so you take a look at that record keeping. Take a look, they're going to want to see some bank— bank statements for a certain date range. They're going to want to see them probably with the checks copies on them. Know your rules, know that that's available. Kind of store that somewhere decent in a digital filing system, whatever one you're using to track. And then the order may— order may request extra details on a case or matter. Some of that might have to be handled by the client. If it's a bar audit of somebody that's complaining about something that happened in a case or matter, that's on the client. But if it's got to do with the accounting, you want to be able to have all that in place. You want to clearly communicate with your client that you have these records available and do that proactively. Don't wait for them to come back to you and say, where is this? The bar usually gives you like 2 weeks. They don't give you a lot of time and you want to make sure you have everything ready. You want to have it into them ahead of time. You don't want to wait till the last bell to get those documents in. Schedule that pre-audit meeting with your attorney to kind of go over what you have and go over what they've requested and make sure that you check off everything that the bar is asking for. Don't have any missing records if at all possible. Give them updates on any of the documents. Um, Really, it's important to sit with your client and explain it all because the other one's going to sit in the audit, or if they even get to that point, if they have to face an auditor. A lot of times these things are just submitted online. If it's not an egregious problem, they will sit with the— they'll just fill the forms out online. They'll hear back from the bar. They usually have to wait a while and then they have to keep looking and looking and looking. It's very stressful, stressful for them. I give you a few examples in the article on kind of best practices of how to show this data. If you do get an audit and you have that formalized PDF that you have to fill out. But know that you want to put it— this is an example of some of the things that we've had to do, but you want to be able to give exactly what they ask for. So if it says column, the first column says date, you want to put the date, you want to put the name of the client, the matter, if it's in that order, make sure you enter the data in that order and that it follows the forms. It's the best practice. I think that explaining the transparency to the auditors and letting the attorney know upfront of any issues that are coming up. So if there is a problem, try filed in that pile of numbers that you're not quite figuring out. It didn't balance and you don't know why, or there was an issue. Maybe the attorney put the money in the wrong bank account and you had to move it from operating to trust because it was a trust deposit, but when the bank— you want to have lots of copious notes. So know that that's really important too. So those are some of the tips on doing this work. You are the emotional support for the attorney to get them through this. Know that you want to do everything clearly. You want to educate the client and, and really look at How you can make this process more manageable, less stressful. And these are key things that they'll never forget that you helped them through this. So know that that's a thing. It's helpful when you do an audit, if you're not physically in the law firm itself and you're an outside firm, let them know that. That helps with the whole managing of this because the Bar usually looks at people that are outside the firm. We're not in the process, we're just maintaining a process. So that's the most important thing is truly keeping the records up to date and reconciled and balanced. And if you find issues where something came wrong or not right, leave a lot of notes as you make the corrections so that you have that available when the audit comes a-knockin'. So I hope that helps, and if you have any questions, feel free to reach out. Join our Law Lab. We have discussions about this. We actually have a cool graph that kind of shows the life cycle of an audit and how it can land and where things can go wrong. Um, that's in our, our portal. So we'd love to have you as members of the Law Lab. And on that note, we'll see you all next week. Bye now. Bye.
