Broker Financial Audit Process

Components of the Audit | How the Audit Works | Audit Determinations | Common Violations | Auditor Evaluation Forms

When selected for an audit, an initial notification audit letter will be sent by the Division with an affirmation and questionnaire regarding real estate activity, notice of escrow, audit checklist, reconciliation worksheet and a transaction file and retention checklist. The broker or brokerage firm is given 15 days from the date of the letter to respond.

Brokers/Brokerage Firms are expected to respond to all audit notification letters in the requested time frames, provide copies of their office policy manual, signature pages, and copies of E&O certificates of insurance. As well, brokers/brokerage firms performing property management services are expected to provide monthly 3-way reconciliations for all trust/escrow accounts that are maintained. This must include journals, ledgers, reconciled bank statements, all copies of canceled checks. 

Audits take 60 days approximately to complete with brokers/brokerage firms having 15 days to respond to the initial notification of the audit letter, and 10 days to respond to any offsite or onsite audit notification letters. 

After the broker/brokerage firm provides their initial response, the auditor will review the documents and responses provided and send either the notification of offsite or notification of onsite audit letter. This notification letter will request that the broker/brokerage firm provide monthly 3-way reconciliations, additional sales transaction files (if necessary), and additional property management files. 

• If the response indicates that they do not perform property management, and closed less than 30 sales transactions in the past 12 months, the auditor will review the 3 most recently closed sales transaction files and try to complete the audit in an expedited process.
• If the response indicates that they closed more than 30 sales transactions in the past 12 months, the auditor will request additional files to equal a 10% sample of the files. 

After the Division receives and reviews additional documents that are requested the auditor will take one of the following three routes to complete the audit. 

If no issues are identified, or if the broker/brokerage firm adequately addresses the items listed in the Audit Correction Letter; generally speaking, the Audit Completion Letter will be prepared and sent, closing out the audit.

Used to document audit findings and provide an opportunity to correct the deficiencies identified. This document is used when audit deficiencies have been identified, particularly those that the Division is authorized to handle internally.

Used to present audit findings, deficiencies, and possible license law violations to the Commission for review.