Formative Assessment Qs 40 - 55

Question 1

Who appoints the agency’s internal auditor?

Answer 1

The OIEC/Principal Agent appoints the (internal) auditor.

Question 2

List the things the OIEC/Principal Agent must do upon becoming aware of money missing from the trust account.

Answer 2

• Notify the Director of Consumer Affairs Victoria within three business days of becoming aware advising the date on which the alleged theft occurred, the amount involved, the reason for it and any action taken to correct it.
• Contact the auditor to conduct a special trust audit to attempt to quantify the amount of the misappropriation and possibly identify the culprit.
• Contact the police and advise them of the misappropriation of trust monies and that a special audit is being conducted.
• If possible, replace the misappropriated amount immediately.
• Alert the OIEC/Principal Agent’s professional indemnity insurer.

Question 3

When is an external audit required under the Estate Agents Act 1980 s.64?

Answer 3

Yearly.

Question 4

What is the main reason it is important for an agency to implement security systems for cash management?

Answer 4

To ensure the protection of the trust funds from fraud, theft; to ensure the client monies are safe, to ensure the safety of staff and customers and to minimise risk to the agency’s premises.

Question 5

What is the major purpose of recording transactions into the agency’s trust account records?

Answer 5

Protect the money held by the agent from errors and fraud and to provide transparent and traceable accounting records.

Question 6

What are the implications if you breach your fiduciary duty with the agency trust account?

Answer 6

Should an agent not perform with skill, care and due diligence the client can sue them in a court of law. The client may be entitled to sue to recover financial loss or damages suffered as a result of the agents’ failure to exercise a duty of care.

Question 7

When can an agent draw sales commission entitlement from monies held in trust? List two.

Answer 7

• After the confirmed settlement of the property.
• Entitlement to commission arises in the case of a sale when a contract becomes unconditional and the contract is enforceable, and advice has been provided to the agent by the party authorised to do so.

Question 8

What documentation is required to enable you to disburse commission payments from the trust account to the agency?

Answer 8

A record of all payments/debits in chronological order processed through the Trust Account

Question 9

Legislation requires that bank charges or fees arising from the trust account must be processed in the agent’s general business account. However, it is not uncommon for agencies to experience instances where the statement for the trust account shows that the bank has charged fees against the trust account. This necessitates immediately advising the bank of the error to ensure that the fees are credited back to the trust account and debited from the general business account. Who else are you required to notify and how?

Answer 9

The OIEC/Principal Agent’s auditor should also be advised in writing.

Question 10

What is the penalty under the Estate Agents (General, Account and Audit) Regulations 2018 if the agency does not record the required particulars on a trust receipt properly?

Answer 10

10 Penalty Units

Question 11

True or False: All withdrawals from the trust account must be correct in all aspects and strictly be for the express purpose of the real estate transaction or be authorised by the person for whom the money is being held. Any misconduct concerning trust monies can undermine public confidence in the real estate industry.

Answer 11

True

Question 12

What are the penalties for breaching the Competition and Consumer Act 2010 in relation to giving false and misleading representations?

Answer 12

For corporations: $10 000 000

For individuals: $500 000

Question 13

True or False: RRPs and agents are required to pay any unclaimed residential tenancy bond monies into the Victorian Unclaimed Money Register if the renter does not claim the monies within twelve months of the end of the lease. As part of this process RRPs and agents provide Consumer Affairs with the following information: your name, the address of the tenancy and the amount of bond amount.

Answer 13

True

Question 14

What can be the impact on the agency and agency brand resulting from fraudulent activities with the trust account?

Answer 14

• Undermines public confidence in the real estate agency/industry
• Liquidation of agency
• Fines and conviction
• Being sued

Question 15

You must update a cash payments journal with all daily withdrawals from the account. For payments made by cheque, this must include the:

Answer 15

• Date, serial number and amount of the cheque.
• Name of the person the payment was made to; or, for a cheque made payable to an authorised financial institution, the institution’s name or BSB and the name of the person receiving the benefit of the payment.
• Name and reference number or other identification of the person on whose behalf the cheque was drawn.
• Details of the account in the trust ledger to which the cheque is to be debited.
• Details of the purpose for which the cheque was drawn.

Question 16

For payments made by EFT, this must include:

Answer 16

• Date, reference number and amount of the transfer.
• Name of the person to whom the payment was made; or, for a payment to an authorised financial institution, the institution’s name or BSB and the name of the person receiving the benefit of the payment.
• Name and number of the account, including the BSB number, to which the amount was transferred.
• Name and reference number or other identification of the person on whose behalf the transfer was made.
• Details of the account in the trust ledger to which the payment is to be debited.
• Details of the purpose for which the payment was made.