Common LSO Spot Audit Bookkeeping Findings — and How to Correct the Records
The most useful response to a bookkeeping finding is not to hide it. Identify the cause, correct the supported records, preserve the audit trail, and build a monthly control that prevents the same problem from returning.
Correct the record from reliable support. Do not erase the history that explains how the correction was made.
Quick answer
The Law Society of Ontario's May 2026 Spot Audit guidance identifies recurring financial-record problems including records not being current, required information missing from records, late monthly trust comparisons, unresolved reconciling items, electronic trust-transfer issues, and inactive client trust balances. The practical bookkeeping response is to trace each issue to reliable source documents, correct supported entries, reconcile the affected period, and document the control that will prevent recurrence.
Six bookkeeping findings worth testing before a Spot Audit deadline
These categories reflect issues highlighted in LSO guidance. They are not predictions about any particular firm and they are not Taxxel-created statistics.
Financial records are not current
When journals, ledgers, bank reconciliations, or month-end records are behind, the firm may be unable to produce a reliable financial trail for the requested period.
Required information is missing from By-Law 9 records
A record can exist but still be incomplete if required transaction details, client references, dates, explanations, or supporting information are missing.
Monthly trust comparisons are late
LSO guidance says trust reconciliations and comparisons are monthly records and must be completed within 25 days after month-end.
Reconciling items remain unexplained or uncleared
Old posting errors, bank errors, deposits in transit, or outstanding items can make the month-end comparison unreliable if they are simply carried forward.
Electronic trust-transfer records are incomplete
Electronic transfers of trust funds have specific record-keeping requirements, including supporting requisitions and confirmations where applicable.
Inactive client trust balances are not followed up
LSO guidance highlights inactive client trust funds and recommends monitoring the last activity date on client trust listings.
Turn each finding into a documented bookkeeping repair
The goal is not a cosmetic cleanup. The corrected records should still show a traceable relationship to bank activity, ledgers, journals, listings, and source documents.
Financial records are not current
Bring supported transactions current from bank statements and source documents, then reconcile each affected account in sequence.
Close trust and general bookkeeping every month using a documented checklist and assigned review date.
Required information is missing from By-Law 9 records
Compare each journal and ledger to the applicable record-keeping requirement and add missing information only where reliable support exists.
Use standardized posting fields and monthly exception reports so incomplete entries are identified before month-end closes.
Monthly trust comparisons are late
Complete any outstanding monthly bank reconciliation, client trust listing, and comparison in chronological order so unresolved items are not carried blindly forward.
Schedule the trust close early enough to allow time for bank-document collection, reconciling-item review, and licensee review before day 25.
Reconciling items remain unexplained or uncleared
Trace each reconciling item to the bank statement, journal, client ledger, deposit support, cheque image, or other reliable source and document the reason for the difference.
Require an owner and follow-up date for every month-end reconciling item instead of allowing unexplained balances to roll forward.
Electronic trust-transfer records are incomplete
Match transfer entries to the available signed requisitions, bank confirmations, client ledgers, and related transaction records.
Make the transfer-support package part of the same workflow that records the trust disbursement rather than a separate later task.
Inactive client trust balances are not followed up
Identify balances with no recent activity, trace the underlying matter and liability, and document the follow-up needed by the licensee.
Include last-activity dates and an inactive-balance review in the monthly trust listing review.
A six-step trust close prevents many findings from becoming historical problems
LSO guidance says the monthly trust reconciliation and comparison should be completed within 25 days after month-end. A disciplined close process makes that deadline an operating control rather than an emergency.
Post
Record trust and general activity with complete transaction detail and source support.
Reconcile
Reconcile each trust bank account and identify outstanding, bank, or posting items.
List
Prepare the month-end client trust listing from the individual client trust ledgers.
Compare
Compare the reconciled trust bank balance to the client trust listing total.
Resolve
Explain and clear differences, unusual balances, inactive funds, and document exceptions.
Review
Have the firm review the completed month-end package before the applicable deadline.
If not, identify the gap instead of manufacturing a clean-looking record.
Do not turn remediation into an undocumented rewrite of history
Do not delete or overwrite original entries simply to make a report balance.
Do not invent missing source documents, dates, explanations, or client references.
Do not carry unexplained differences forward month after month without investigation.
Do not treat an accounting-system report as complete if the underlying journals, ledgers, bank records, and source documents do not support it.
Do not assume bookkeeping cleanup replaces legal advice or the licensee’s responsibility for the firm’s records.
How Taxxel can help with the bookkeeping side of remediation
Taxxel can assess the existing bookkeeping file, identify missing or inconsistent financial records, bring supported books current, reconcile trust records, trace reconciling items, organize source documents, and prepare a structured financial-record package for the firm to review. Taxxel does not perform the LSO audit, provide legal advice, certify compliance, or guarantee a regulatory outcome.
Official sources
This article provides practical bookkeeping information only. It is not legal advice and is not an official Law Society interpretation.