Cal. Code Regs. Tit. 10, § 2846.5 - Report of Annual Trust Fund Accounts Review

Current through Register 2021 Notice Reg. No. 52, December 24, 2021

(a) The annual report of a review of trust fund financial statements required under subdivision (a) of Section 10232.2 and/or subdivision (o) of Section 10238 of the Code shall include confirmation by an independent public accountant that:

(1) The broker maintains those records specified in Sections2831 and 2831.1 of these regulations, and reconciles such records in accordance with Section 2831.2 of these regulations.

(2) Each trust fund bank account is maintained by the broker in compliance with Sections 2832 and 2834 of these regulations.

(3) The accountant has reviewed the accompanying balance sheet of trust funds held by the broker as of the last day of the fiscal year, and the accompanying statement of receipts and disbursements of trust funds and changes in cash for the fiscal year, in accordance with standards established by the American Institute of Certified Public Accountants.

(4) The accountant is not aware of any material modifications that should be made to the trust fund financial statements in order for them to be in conformity with generally accepted accounting principles.

(5) The adjusted balance(s) of the bank trust account(s) maintained by the broker as shown in the accompanying financial statements were on deposit as of the financial statements date.

(6) The trust fund bank account balance(s) and receipts and disbursements shown on the financial statements agreed with the amounts reflected on the cash records specified in Section 2831 of these regulations.

(7) The trust fund liability balance for each open account as itemized in the financial statements agreed with the amount reflected on the separate beneficiary records specified in Section 2831.1 of these regulations.

(b) In preparing the report referred to in subdivision (a), the accountant may incorporate qualifying representations or disclaimers substantially as follows:

(1) All information included in the financial statements examined by the accountant are representations of the broker or of responsible officers of the broker.

(2) The review by the accountant consisted principally of inquiries of company personnel and analytical procedures applied to financial data. It was substantially less in scope than an examination in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. The report therefore includes no such opinion.

(c) In lieu of complying with subdivision (a) above, a broker may satisfy subdivision (a) of Section 10232.2 and/or subdivision (o) of Section 10238 of the Code by submitting the report by a California independent public accountant of an audit of the trust fund financial statements of the broker in which the accountant expresses an unqualified opinion that the financial statements fairly present, in conformity with generally accepted accounting principles, (1) the trust fund position of the broker at the end of the fiscal year and (2) a compilation of receipts and disbursements of trust funds for the fiscal year.

(d) The annual report of a review of trust fund financial statements shall include the following financial statements:

(1) Balance sheet of trust funds held by the broker as of the last day of the fiscal year. Each of the trust fund bank accounts shall be identified, either in the balance sheet or in the notes thereto, by name of bank and account number.

(2) Statement of receipts and disbursements of trust funds and changes in cash for the fiscal year.

(3) Schedule of trust fund liability balances showing each open beneficiary account in connection with trust funds received in carrying on the activities described in subdivisions (d) and (e) of Section 10131 of the Code.

Notes

Cal. Code Regs. Tit. 10, § 2846.5

Note: Authority cited: Section 10080, Business and Professions Code. Reference: Sections 10145,10232, 10232.2 and 10238, Business and Professions Code.

1. New section filed 5-13-82; effective thirtieth day thereafter (Register 82, No. 20).
2. Amendment of subsection (a) and new subsection (d) filed 5-4-89; operative 6-3-89 (Register 89, No. 23).
3. Amendment of subsection (a)(2) filed 11-9-2000; operative 12-9-2000 (Register 2000, No. 45).
4. Amendment of subsections (a) and (c) and Note filed 2-28-2006; operative 3-30-2006 (Register 2006, No. 9).