How a Law Firm Caught a Trust Account Discrepancy Before It Became a Bar Complaint

Sam's List Editorial | 2026-06-06

How a Law Firm Caught a Trust Account Discrepancy Before It Became a Bar Complaint The managing partner didn't steal anything. He didn't intend any harm. He was doing the reconciliations himself, every month, and he thought the account was clean. It wasn't. There was a

2,500 discrepancy in the firm's IOLTA trust account — client funds disbursed before a settlement check cleared, inadvertently covered by another client's trust balance. On a bank statement review, nothing looked wrong. The overall account balance was positive. The problem was invisible until someone ran a proper three-way reconciliation with per-client ledgers. Legal Ease Bookkeeping ran that reconciliation. They found the discrepancy. They found it before the state bar's annual review period. That timing made all the difference. The Client and the Situation The firm was a four-attorney litigation practice. The managing partner had been handling trust account reconciliations personally since the firm's founding — a reasonable approach for a small firm, and a common one. The QuickBooks setup had been configured years earlier by an accountant who wasn't a law firm specialist. It tracked trust account activity in a single account with client matter information noted only in the memo field of each transaction. There were no per-client sub-ledgers. The account tracked total trust balance — not what belonged to each individual client. This setup is more common than it should be. QuickBooks doesn't automatically create per-client trust ledgers. Setting them up requires someone who knows to do it and knows how. The firm's original setup didn't include them. The managing partner reconciled the total trust account balance against the bank statement each month. The numbers matched. He filed the reconciliation and moved on. Nothing in that process would have caught a per-client ledger imbalance, because there were no per-client ledgers to check. What the Reconciliation Found Legal Ease Bookkeeping was engaged to take over the firm's bookkeeping, including trust accounting. The first step in any trust account engagement is a three-way reconciliation: the bank statement, the QuickBooks trust account register, and the per-client ledger, all reconciled to the same balance on the same date. There was no per-client ledger. Building one was the first task. Reconstructing 18 months of per-client trust activity from the existing transaction records took several days. Each transaction in the trust account register had to be matched to its corresponding client matter, which required cross-referencing memo...

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