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Spot Audit

Spot Audit supports and promotes high quality law firm record-keeping, as well as providing onsite support and ensuring compliance with LSO requirements by conducting audits.

You may wish to review the Law Society’s Bookkeeping Guide which is the main Spot Audit resource.

Spot audits and you: Setting standards, meeting expectations

  • The Spot Audit Program overview

    Designed as a proactive compliance measurement and problem detection tool, spot audits:

    • measure the integrity of law firm financial filing (By-law 8)
    • assess ongoing compliance with financial record-keeping requirements (By-law 9) and the Rules of Professional Conduct, and
    • identify serious misconduct related to financial matters.


    A primary goal, which reflects a remedial approach, is to provide on-site guidance to help your law firm correct minor deficiencies with record-keeping practices before they lead to serious non-compliance or misconduct issues.

    Spot audits also provide an in-depth review of client files in cases where the firm acts for private lenders or a lawyer of the firm exercises control over a client's estate.

    Research has shown that the areas of practice that account for the largest number of Compensation Fund claims are private mortgage investments and control of estate funds.

  • Authority

    Section 49.2 of the Law Society Act authorizes the Spot Audit process.

  • Confidentiality and solicitor/client privilege

    In addition to reviewing financial records, the auditor will request production of client files including mortgage and estate files.

    In the course of the audit, the auditor may copy documents from the financial records and/or client files (as authorized by section 49.9 of the Law Society Act).

    Information obtained during the audit is kept confidential within the Law Society (section 49.12) and except for the admissibility of these documents in proceedings under the Law Society Act, solicitor/client privilege is maintained (section 49.8).

  • Application of PIPEDA to an audit under the Law Society Act

    The Personal Information Protection and Electronic Documents Act (Canada) (PIPEDA) applies to personal information which an organization collects, uses or discloses in the course of commercial activities (subsection 4 (1)).

    The Law Society conducts audits of lawyers' financial records pursuant to section 49.2 of the Law Society Act. An audit conducted by the Law Society is not a commercial activity. It is a regulatory activity.

    The collection and use of personal information by the Law Society in the course of conducting an audit is not subject to the requirements or restrictions imposed by PIPEDA.

    PIPEDA may apply to certain personal information that lawyers collect in the course of their practice, requiring them to obtain consent prior to collecting, using or disclosing the personal information. However, under clause (i) of subsection 7 (3) of PIPEDA, an organization may disclose personal information without knowledge or consent of the individual if required by law. 

    Lawyers whose financial records are being audited by the Law Society are required by law to provide the Law Society with personal information. Under subsection 49.2 (2) of the Law Society Act, such lawyers are required to produce documents in their possession or control and to provide information for the purpose of understanding or substantiating the financial records.

    The requirements of subsection 49.2 (2) are sufficient to bring lawyers within clause (i) of subsection 7 (3) of PIPEDA, permitting them to disclose personal information to the Law Society without knowledge or consent of the individual.

  • Selection

    Although a significant number of spot audits are selected at random, there are other circumstances which may trigger an audit, including:

    1. failure to submit the Annual Report Filing with the Law Society
    2. newly formed law firms to ensure appropriate record-keeping practices and money handling procedures are established and maintained
    3. identification of inadequacies during a previous spot audit, which suggest a follow-up audit is prudent to ensure continued compliance
    4. information on the Annual Report Filing, which suggests non-compliance with the Law Society's record-keeping provisions or Rules of Professional Conduct
    5. referral of lawyers/law firms from another Law Society department.
  • Who will conduct the audit?

    In general, auditors employed by the Law Society will conduct audits, however, some audits will be contracted to local public accounting firms.

  • LSO Connects

    If your firm is selected, an auditor will contact you to make arrangements for your spot audit to be conducted.

    At this time, you may be asked to set up an account on LSO Connects, the Law Society’s secure communication channel.

    LSO Connects is where you will receive instructions and communications pertaining to your spot audit.

  • Appointments

    You will be asked to book an appointment at a mutually convenient time within a two- to three-week timeframe to review your records.

     Pre-arranged appointments offer a number of advantages:

    • they are less intrusive than unscheduled visits, and
    • provide the opportunity to rectify any minor errors in your record-keeping practices prior to the auditor's visit.


    While the two-to-three-week advance notice is designed to accommodate your schedule, the Law Society must balance your needs and preferences with its public protection mandate.

    For this reason, if you seek to defer the initial spot audit appointment, or subsequently cancel your initial spot audit appointment, you may be required to submit a copy of your most recent trust reconciliation (trust bank statement(s), detailed trust reconciliation(s) and client trust listing) to the auditor.

    Failure to do so may result in an immediate unannounced visit or a referral to Professional Regulation.

    Via your LSO Connects account, the auditor will send you a list of books, records and client files to have available at the audit.

  • Letter of Introduction/Law Society identification

    If the audit is being conducted by a member of a public accounting firm retained by the Law Society, the auditor will provide a letter of introduction prepared by the Law Society. As the letters of introduction are provided to the auditors at the same time as their caseload, your letter may be dated several months before the date of the auditor visit.

    Law Society employees conducting spot audits will produce Law Society identification confirming that they are employees of the Law Society when they arrive to conduct the audit.

  • Audit report to licensees

    To ensure quality control, we have developed a standard spot audit software program which the auditor can complete on-site at your office. Following the completion of your audit, the auditor will provide you with the Audit report to members.

    The auditor will meet with you and/or your accounting staff to discuss areas where your record-keeping and money-handling practices are not in compliance with Law Society requirements.

    The auditor may ask you to initial each area of concern to verify that any deficiencies and their remedies were discussed with you.

    The auditor may require you to provide additional information directly to the Law Society to ensure correction of the deficiencies identified.

  • Review of reports

    After reviewing the Spot Audit Report completed by the auditor, a program supervisor will do one of the following:

    • close your file, if there are no deficiencies noted or if the deficiencies are minor and have been addressed in the Audit Report
    • send a follow-up notice requiring you to submit documentation, or proof that the inadequacies identified in the Audit Report – such as trust comparisons or discharges of mortgages – have been completed to the Law Society's satisfaction
    • refer your file for a re-audit, if the inadequacies are serious enough to warrant further review to ensure they are remedied
    • refer you to the Practice Review Program of the Law Society for remedial assistance with your practice
    • refer you for further regulatory investigation, if the audit discovers possible professional misconduct (i.e., a serious breach of the Rules of Professional Conduct/by-laws or failure to correct inadequacies identified on a previous audit).

    You will be notified of the outcome of your Spot Audit through your LSO Connects account and be provided with further instructions.
  • Cost recoveries

    In certain situations, the Law Society may make an application pursuant to By-law 11 made under the Law Society Act for an order requiring you to pay the cost or a portion of the cost of the audit or re-audit.
    The following list identifies situations that may warrant an application for cost recovery:

    • the audit was required because of your failure to submit the Annual Report filing
    • the auditor could not gain entry to your business premises on the scheduled date
    • you fail to provide to the auditor the financial records and other documents within the timeframe arranged between you and the Law Society
    • your failure to produce current financial records significantly increased the amount of time required to complete the audit
    • you produce financial records that are not in compliance with the requirements of By-law 9 which increased the amount of time required to complete the audit.


    You may wish to review sections 38 to 42 of By-law 11 in its entirety in order to obtain a better understanding of the application process associated with the payment of costs of a spot audit or re-audit.

  • Continuous improvement

    Your input is important – please help us improve the audit process by evaluating the spot audit and the conduct of the auditor by emailing spot@LSO.ca.

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