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Lawyers' Fund for Client Protection
Compliance Audits

The Purpose

While the main purpose of the Lawyers' Fund is the reimbursement of clients whose attorneys have defalcated, another important function is the program of compliance audits. Rule 9 of the Rules of the Trustees of the Lawyers' Fund for Client Protection mandates that selected attorneys will be subject to audit by an independent certified public accountant in order to determine that the attorneys' books and records are in compliance with the recordkeeping requirements of Rule 1.15 of the Delaware Lawyers' Rules of Professional Conduct. It is hoped that a high level of compliance among Delaware attorneys will reduce incidents of attorney malfeasance and negligence and, thereby, provide a greater level of consumer safety and confidence.


The Auditor

The Lawyers' Fund contracts the services of an independent CPA firm, Judith M. Scarborough, CPA/ABV, CVA Master, Sidlow & Associates, P.A..  The auditors perform approximately 60 compliance audits annually.  However, their services extend beyond the audits they perform.  Their role is also educational and investigative.  The auditors write articles and speak at seminars in an attempt to educate attorneys about the importance of proper recordkeeping. They are available to help attorneys who are setting up their books and will assist if an attorney encounters a problem in his or her recordkeeping.  If you require the assistance of the auditors, you may contact Judith M. Scarborough, CPA/ABV, CBA, Master, Sidlow & Associates, P.A., 2002 W. 14th Street, Wilmington, DE 19806 or e-mail jscarborough@mastersidlow.com.  


The Audit Program

The Audit Program (Rule 9 of the Rules of the Trustees of the Lawyers' Fund for Client Protection) is used by the Auditor of the Lawyers' Fund for Client Protection in his audits of attorneys' books and records to determine if they are in compliance with Rule 1.15 of the Delaware Lawyers' Rules of Professional Conduct.

It is also used by independent CPA firms if they are engaged by their attorney clients to do compliance audits.It is beneficial to have independent CPA's do a compliance audit because, even though it's not guaranteed, it is not likely that a law firm will be selected by the Lawyers' Fund for an audit if their CPA firm has certified their compliance.

Law firms can also use the Audit Program as a checklist to make sure they are in compliance. The firm's own staff, bookkeeper, office manager, or accountant can review each item in the Audit Program to make certain there are no exception items. If this is done, and the firm is selected for a compliance audit, it can be secure in the knowledge that the Lawyers' Fund Auditor will find no exceptions, the firm will be in compliance, and it will avoid the difficulties of the disciplinary process.


The Certificate of Compliance

The provisions contained in Rule 1.15 of the Delaware rules of Professional Conduct represent the financial recordkeeping requirements that Delaware attorneys must follow when engaged in the private practice of law. These provisions are also reflected in the Certificate of Compliance that is included in each attorney's registration statement, filed annually pursuant to Delaware Supreme Court Rule 69. The provisions contained in the Rule provide a level of control needed to safeguard client funds and the lawyer's own operating funds.

The Certificate of Compliance contains the essential financial recordkeeping procedures in Rule 1.15, which if performed on a timely basis, ensure compliance with the Rule. One example of the control provided by these procedures is the monthly requirement that the escrow bank account, which holds only client funds, be reconciled to a listing of each client's balance and the total of all client funds being held. This procedure should ensure that each client balance is supported by the correct amount of cash in the bank. It should also prevent the loss of identity of any client funds through negligence.

Prior to the implementation of the Certificate of Compliance, attorneys only signed a general statement of compliance on the annual registration form. Since the compliance audits revealed a significant level of non-compliance with Rule 1.15, it appeared as if many attorneys were signing the general statement of compliance without understanding the specific recordkeeping requirements of the Rule.

The Lawyers' Fund for Client Protection proposed to the Delaware Supreme Court that the Certificate of Compliance be included with the annual registration. It was felt that, by having attorneys read each specific procedure and answer each one, yes or no, the result would be an increased awareness of the specific recordkeeping requirements and, thus, lead to an increased level of compliance.

Along with its other efforts to educate attorneys about the need for proper recordkeeping, the Lawyers' Fund for Client Protection believes that the Certificate of Compliance helps attorneys to safeguard client funds and to control their own funds.


Lawyers' Fund for Client Protection of the Supreme Court of Delaware
Carvel State Office Building | 820 N. French Street, 11th Floor | Wilmington, DE 19801
Phone: 302-577-7034 | Fax: 302-577-1006
Email: Bunny.Christopher@state.de.us