Which statement best describes the trust account requirements under the Real Estate Agents Act 2008?
Correct Answer
B) Held at a registered bank and audited each year by a qualified auditor
Section 122(3) of the Real Estate Agents Act 2008 requires trust money to be held at a bank carrying on business in New Zealand, and s 125 requires trust accounts to be audited as the regulations prescribe. Under the Real Estate Agents (Audit) Regulations 2009 the agency appoints a qualified auditor, who examines the accounts at least three times a year and gives the Authority an annual audit report.
Why This Is the Correct Answer
Section 122(3) requires trust money to be held at a bank carrying on business in New Zealand, and s 125 requires the accounts to be audited as the regulations prescribe. Under the Real Estate Agents (Audit) Regulations 2009 the agency appoints a qualified auditor (reg 10), who examines the accounts three times a year and reports annually.
Why the Other Options Are Wrong
Option A: Held at any registered bank and audited by the REA every month
The Authority does not audit trust accounts, and nothing requires a monthly audit; monthly reconciliation is the agency's own job.
Option C: Held at any financial institution and reviewed quarterly by the agency
The account must be at a bank, not any financial institution, and review is by an independent auditor, not by the agency itself.
Option D: Held at the Reserve Bank and audited twice a year by a chartered accountant
The Reserve Bank does not hold agency trust accounts, and since 2014 the auditor must be a qualified auditor rather than simply a chartered accountant.
Deep Analysis of This Compliance Question
Two controls protect trust money: where it is held and who checks it. It must sit at a bank carrying on business in New Zealand, in an account designated as a trust account. It is checked by an independent qualified auditor, a definition taken from the Financial Reporting Act 2013, who must not have a conflict of interest with the agency. The auditor examines the accounts three times a year and files an annual report with the Authority, and must report defaults and irregularities.
Background Knowledge for Compliance
Real Estate Agents Act 2008 s 122 (trust accounts at a bank), s 125 (audit as prescribed). Real Estate Agents (Audit) Regulations 2009: reg 9 (agency must appoint an auditor), reg 10 (auditor must be a qualified auditor), reg 11 (disqualification and conflicts), reg 15 (monthly reconciliation), reg 21 (three examinations a year), reg 22 (annual audit report to the Authority).
Memory Technique
Remember BQY: a Bank holds the money, a Qualified auditor checks it, and the audit report goes to the Authority Yearly.
Eliminate any option that puts the money outside a bank, has the Authority doing the audit, or names the wrong kind of auditor.
Exam Tip for Compliance
The auditor is a qualified auditor appointed by the agency, not the Authority. Examinations happen three times a year, and the report is annual.
Real World Application in Compliance
An agency keeps its trust account with a trading bank and appoints an independent audit firm. The auditor examines the accounts three times during the year ending 31 March and files the annual audit report with the Authority within 10 working days of finishing the final examination.
Common Mistakes to Avoid on Compliance Questions
- •Thinking the Authority audits trust accounts
- •Confusing monthly reconciliation with the audit
- •Assuming any chartered accountant can act as auditor
Related Topics & Key Terms
Key Terms:
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