We audit every new brokerage within the first 12 months of operation, and we visit all brokerages on an ongoing basis.
RECBC audits brokerages as a result of:
- a complaint or inquiry,
- licence conditions or disciplinary actions,
- Accountant’s Report concerns,
- books and records concerns,
- a previous audit showing deficiencies,
- new or reinstated managing broker,
- change of director or managing broker,
- ongoing compliance investigation,
- outdated audit history, and/or
- the first year of licensed operation.
RECBC has the legislative authority to access any documents that may relate to a brokerage’s dealings.
RECBC’s auditors are not required to provide advance warning before auditing a brokerage.
However in most cases an RECBC auditor will contact the brokerage in advance to schedule an audit. This helps to ensure there is nothing to hinder the audit (e.g. managing broker is out of town, books and records are stored offsite or at the external accountant’s office).
During this initial contact the auditor will:
- ask questions about the brokerage’s activities with respect to real estate trading services, rental and strata property management and
- advise about the information that must be made available for the audit.
When an RECBC auditor arrives at a brokerage, they will have a brief discussion with the managing broker to:
- learn about the brokerage and the level of activity during the year,
- determine what additional documents will be required to perform the audit, and
- have the managing broker introduce any key staff members to the auditors.
The average audit is completed within one to two days’ attendance at the brokerage office during normal business hours.
During the audit, auditors will normally confirm that:
- the current licences for the brokerage head office or branch office are prominently displayed;
- the licences of all related licensees are available for public audit (section 4-1, Rules);
- there is a sign indicating the licensed name of the brokerage at the entrance to the office and in the building directory, if applicable (section 4-2, Rules);
- the brokerage has a managing broker in active charge of the business (section 3-1, Rules);
- the brokerage maintains proper books and records (Part 3 RESA, Part 3 Regulation, Parts 5, 6, 7 and 8 Rules) including:
- monthly trust reconciliations for each trust account;
- monthly trust liability reconciliations listing every client the brokerage holds trust funds for and the amount of funds being held for each client;
- trust bank statements, cancelled cheques and deposit books;
- trust journal and ledger for each trust account;
- a list of all real estate sales, rental and strata properties managed since the brokerage was first licensed;
- trade record sheets and copies of contracts in all real estate sales files;
- rental and strata property management files containing copies of financial statements sent to owners, invoices and rental and strata property management agreements;
- general account bank statements, cancelled cheques, reconciliations and journals;
- trust accounts have been designated as such by including the words ‘trust account’ on the trust cheques and bank statements (section 7-1 of the Rules);
- bank accounts have no overdrafts or debit balances, and funds held in trust by the brokerage have been deposited in accordance with section 7-5 of the Rules;
- disclosure has been made in personal real estate acquisitions (section 5-9 of the Rules); and
- trust or general accounts have no unusual items flowing through them.
All the items reviewed are expected to be current. They are considered crucial to the brokerage’s business.
Once the onsite audit has been completed, the auditors will discuss the results of the audit with managing brokers, and explain any deficiencies discovered.
Managing brokers should make sure they clearly understand the problems identified during the audit, and the actions required to correct those problems.
Following the audit, managing brokers will receive a written report outlining the findings. Managing brokers must respond in writing to any deficiencies noted in the report and outline the steps that will be taken to ensure the deficiencies do not recur in the future.
When serious deficiencies are discovered during an audit, a copy of the audit report is forwarded to RECBC’s Legal Department to determine whether there may have been a contravention of RESA, the Real Estate Services Regulation or the Rules.
RECBC has the authority to:
- issue a letter of warning,
- order a hearing,
- levy an administrative penalty,
- charge the brokerage for the cost of the audit and/or
- order a follow-up audit.
If, after a hearing, the Discipline Hearing Committee finds that the brokerage, the managing broker or a real estate professional has contravened RESA, the Real Estate Services Regulation or the Rules, the Discipline Hearing Committee may reprimand, suspend, or cancel the licences of those involved.
The Discipline Hearing Committee may also issue an order for costs of the hearing and impose a fine of up to $250,000 for individuals and $500,000 for brokerages, per contravention.