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Audits of Real Estate Brokerages: Top 10 Findings
BCFSA’s Audit and Assurance team members administer the audit program which is responsible for continuously auditing brokerages and real estate licensees throughout B.C. and evaluating the filing of annual Accountant’s Reports. The audit program ensures brokerages are operating in accordance with the Real Estate Services Act (“RESA”), Real Estate Services Regulation (“the Regulation”) and the Real Estate Services Rules (“the Rules”). It is an important part of our responsibility to protect real estate consumers.
Here is a summary of the top 10 issues/exceptions noted by auditors while conducting more than 120 audits in the past year:
| Ranking | Instances | Issue Descriptive |
|---|---|---|
| 1 | 49 | Rule 54: Licensee failed to disclose the nature of the representation that the licensee would provide to a party to a trade in real estate prior to providing real estate services using the Disclosure of Representation in Trading Services. |
| 2 | 35 | Rule 80(c): Managing broker did not ensure that reconciliations were prepared within five weeks after the month end. |
| 3 | 29 | Rule 72(2): Brokerage failed to ensure that all monthly bank reconciliations for the trust accounts are signed and dated by the managing broker or a person designated by the managing broker. |
| 4 | 28 | Rule 81: Managing broker did not ensure that all trust liability and asset reconciliations are reconciled within 5 weeks after month end. |
| 5 | 27 | Rule 52/54/55: Disclosures-Various disclosure issues were not made including that they must be in writing, must be made with regards to remuneration, of representation in trading services, of risks to unrepresented parties, etc. |
| 6 | 25 | Rule 43: Managing broker did not ensure that the Service Agreements are amended to meet the content requirement outlined under this section of the Rules. |
| 7 | 22 | Rule 73: Negative balances in trust accounts and trust records were evident and appropriate action was not taken |
| 8 | 20 | RESA section 31: Managing broker did not ensure that payments to third parties on behalf of licensees are withdrawn directly from a commission trust account. |
| 9 | 19 | Rule 52-56: Managing broker did not ensure that the licensee promptly provide written disclosure under s 56 of Rules to the client regarding any remuneration to be received from anyone other than the client. |
| 10 | 19 | RESA section 26 and Rule 72: Managing broker did not ensure all brokerage trust accounts are designated as such in the records of the savings institution and the brokerage. |
It is important that licensees take note of the above list to ensure that actions and real estate services provided are in compliance with the legislation.
For further information please access the BCFSA website postings here: Audit Program | BCFSA