The review program is moving from pilot to scale.
The State Bar piloted voluntary compliance reviews with 21 firms in 2024, selected 100 attorneys for mandatory reviews in 2025, and has now expanded the 2026 program to 400 attorneys. Selection is random and crosses firm sizes, so being chosen is not itself an allegation of misconduct.
The review is broader than checking whether a bank balance reconciles. The State Bar describes a process focused on recordkeeping, supervision, accuracy, required notifications and distributions, and corrective action where practices fall short.
The pilot results exposed control gaps—not isolated arithmetic errors.
Results released with the 2025 launch showed that many participating firms had deficiencies in the records and oversight that should make client funds traceable:
Those findings do not mean every deficiency involved missing client money. They do show how easily a firm can believe its process is working while the evidence needed to demonstrate compliance is incomplete.
Review the State Bar’s 2025 pilot findingsAudit readiness should be a monthly operating discipline.
A firm should not need an audit letter to discover whether its trust-account records can be explained. A reliable system produces a contemporaneous record showing what was received, who owns it, what was disbursed, what remains outstanding, and who reviewed the reconciliation.
Software can support that process, but it cannot replace it. Migrated data, incomplete matter records, stale checks, posting errors, unexplained residual balances, or activity recorded outside the primary system can all weaken the audit trail even when the bank account appears balanced.
Trust-account readiness is not a document-gathering exercise. It is the result of a control process performed correctly, to the penny, every month.
What law firms should verify now.
- Complete the three-way reconciliation.Confirm the adjusted bank balance, trust account journal and total individual client ledger balances agree exactly.
- Test the client ledgers.Investigate negative balances, unidentified balances, stale matters and transactions that cannot be tied to supporting records.
- Document the review.Retain the reconciliation, supporting reports, explanations for reconciling items and evidence of attorney oversight.
- Examine timing requirements.Verify that client notifications, distributions and transfers were completed and documented within applicable deadlines.
- Escalate discrepancies early.Bring accounting, operational and legal advisers together when records are incomplete or the correct treatment is uncertain.
Reconstruction should establish the facts before it attempts to explain them.
When a firm is behind, the first priority is a reliable financial record. That may require rebuilding journals and client ledgers, tracing transactions to source documents, identifying unresolved items, and producing a defensible reconciliation package.
STAK8 supports law firms and their counsel with trust-account reconstruction, three-way reconciliation, process remediation and organized audit-response support. When retained and directed by counsel, we structure our work to support applicable privilege and work-product considerations.