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BCFSA protects British Columbians by upholding conduct standards in the financial services sector. BCFSA’s audit program is established to continuously audit brokerages and real estate licensees throughout British Columbia. To provide effective consumer protection, the audit program supports proactive monitoring of market conduct activities to identify and intervene to address harmful business practices in the real estate services sector.
BCFSA supports effective consumer protection by administering a range of proactive monitoring activities to identify and respond to emerging risks, and by setting robust requirements for registration or licensing with BCFSA. BCFSA performs audits of real estate brokerages to ensure they 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”).
Real estate brokerages are required to provide access to BCFSA to review the accounts and records under Section 74 [Superintendent review of accounts and other records] of the Rules.
The objective of the audit program is to protect real estate consumers in British Columbia by:
- Ensuring public trust funds are protected and are being used appropriately by the brokerage;
- Assessing whether the brokerage’s overall operations, internal processes, and financial records are in compliance with RESA, the Regulation, and the Rules; and
- Engaging in discussions with the managing broker to educate and provide guidance to ensure compliance with all legislative requirements and support brokerage operations.
The audit program incorporates risk assessments and assigned risk ratings to all brokerages. Risk assessments are informed by various data points including, but not limited to: annual regulatory filings, general non-compliance issues, misappropriation of trust monies, and general books and records.
Within the first year of operations of a newly licensed brokerage, the managing broker may receive a check-in phone call from a member of BCFSA’s Audit & Assurance Team. The purpose of the call is to assess the brokerage operations, answer any questions the managing broker may have, and direct the managing broker to BCFSA’s resources.
When the brokerage is selected for an audit, the managing broker will receive an email or phone call from the auditor to schedule the audit, which begins with an initial interview.
The auditor may conduct the audit either in person or remotely, provided that the managing broker is able to provide the documents electronically.
The auditor will send an email with the details of the audit, including a request for documents.
During the initial interview, the auditor will inquire about the brokerage’s activities with respect to trading services, rental property management, and strata property management (as applicable). The managing broker may request to have the bookkeeper, conveyancer, brokerage owner, and other relevant staff present during the meeting.
The documents reviewed by the auditor may include but are not limited to the following:
- Monthly bank reconciliations, trust liability and asset reconciliations, trust ledgers, bank statements, and other financial records of all trust bank accounts of the brokerage;
- Monthly bank reconciliations, general ledgers, bank statements, and other financial records of the non-trust bank accounts of the brokerage; and
- Depending on the services the brokerage is licensed to provide, the auditor will select samples and request documents for specific trades, and/or rental/strata properties.
Once the auditor deems the audit to be substantially complete, they will schedule an exit interview with the managing broker to discuss their findings. The managing broker is given the opportunity to ask questions and provide comments on the findings and observations presented.
The Audit Report is prepared by the auditor and emailed to the managing broker. For each observation in the Report, the managing broker is required to provide a written response on the measures the brokerage will implement to ensure compliance with the legislation. The auditor may require specific documents (i.e., bank reconciliations, trust liability and asset reconciliations) to be provided as part of the response to the report.
If serious deficiencies are observed during the audit, the Audit & Assurance Team may choose to take one or more of the following actions:
- Include an Administrative Penalty (“AP”) warning in the Audit Report;
- Issue a Letter of Advisement;
- Conduct a follow-up audit;
- Charge audit costs;
- Levy an AP; or
- Forward to the Investigations Department and/or Legal Department.
During the audit process, the managing broker is expected to provide a response to the auditor’s correspondence and adhere to the auditor’s requests and deadlines pursuant to Section 21 of the Rules [licensee must reply promptly to Superintendent].
Upon receipt of the Audit Report, the managing broker is required to take immediate corrective action pursuant to Section 6(2) of RESA [managing broker must be in active charge and control of the brokerage’s business] and Section 28 of the Rules [managing broker responsibilities].
Any actions of non-compliance by the managing broker or licensee as indicated above may be subject to an AP.
All copies of documents and correspondence provided to the auditor are maintained within the Audit & Assurance team. Information and evidence may be shared with the Legal and Investigations departments for the purpose of disciplinary processes.