Strong internal controls are key to managing a compliant, financially healthy legal practice. They help prevent errors, protect client funds, and ensure you meet your obligations under By-Law 9. Whether you're running a solo practice or leading a small firm, implementing structured internal control systems will help you stay organized, audit-ready,and confident in your day-to-day operations.
This guide outlines best practices for internal controls in Ontario law firms, including trust accounting procedures, financial record keeping, and reporting habits that support long-term compliance.
Segregation of Duties
Incorporate a separation of responsibilities wherever possible. This means assigning different people tomanage bookkeeping, authorize transactions, and review financial reports.
Why it matters: Segregation of dutiesreduces the risk of error and ensures oversight at each stage of financialmanagement.
Monthly Trust Reconciliations
Every Ontario lawyer holding client funds must reconcile their trust account by the 25th of each month. This involves a three-way comparison of the trust bank statement, the trust ledger, and the client trust listing.
Why it matters: Timely reconciliations help identify discrepancies early, protect client funds, and keep your firm audit-ready.
Maintain Comprehensive Records
Maintain organized and up-to-date records for both trust and general accounts. These include:
- Trust receipts and disbursement journals
- Separate client trust ledgers
- General receipts and disbursements journals
- Monthly bank statement
- Duplicate deposit slips
- Cleared cheques and EFT confirmations
- Forms 9A, 9B, 9C (where applicable)
Why it matters: Accurate records are essential for demonstrating compliance and simplifying your audit process.
Authorization Controls
Establish clear internal policies outlining who is authorized to:
- Approve trust disbursements
- Sign cheques or initiate EFTs
- Apply payments to invoices
Why it matters: Defined approval protocols prevent unauthorized transactions and create accountability.
Review Financial Reports Regularly
Make financial reviews a monthly routine. Reports to review include:
- Trust ledger balances
- Reconciliation summaries
- Aged accounts receivable
- Unbilled expenses
Why it matters: Regular reviews help identify late billing, missing documentation, or inconsistencies that need addressing.
Build Internal Controls into Your Routine
Internal controls work best when they are part of your day-to-day systems — not an after thought. When workflows support compliance by design, audits become easier and your financial oversight becomes stronger.
If you're working toward better systems and want a clear, lawyer-focused framework, a new legal accounting course is launching soon — built specifically for Ontario practitioners.
In the meantime, you can book a free 15-minute consultation to review your current internal control setup and get professional insight on where to improve.
