What do the different types of audit reports generated by spot audits mean?
The Law Society’s audit department issues different types of audit reports. Essentially the reports are considered either pass or fail. Types 1 and 2 are considered passing. A report type 1 is issued when the books and records are up-to-date and there are NO rule exceptions. A report type 2 occurs when there are only a few minor rule exceptions to report. These rule exceptions are most likely the result of human error or when all the accounting rules are not understood. Part of the function of the spot audit is to educate the members on any new rules and to assist members with any accounting type questions that need to be dealt with. A report type 3 occurs there are many rule exceptions found and/or rule exceptions of a more serious nature are found. The results of this type of audit indicate that law firm is not following some of the more significant accounting rules. The law firm will be required to submit an undertaking advising, inter alia, that they have made the necessary correct
