The requirement, in the words of the Regulation
Regulation 8(1) of the Estate Agents (Accounts) Regulations 1981 requires that the accounts be audited “by a qualified auditor within six months after the end of each accounting period”. The Regulations were made on 26 October 1981 and came into operation on 3 May 1982; they have been in force, unchanged in this respect, for the whole of most agencies' trading lives.
The auditor reports under reg 8(3) on whether the requirements of the Act as to the manner in which clients' money is to be dealt with, and of the Regulations, have been complied with or substantially complied with. Under reg 8(9) you must produce the latest report on demand to a duly authorised officer of an enforcement authority.
Six months is shorter than it sounds
Most agency owners plan their year around the corporation tax deadline of nine months and one day, and the Companies House filing deadline behind it. The client account audit runs on a different and shorter clock. A 31 December period end means a signed report by 30 June — which in practice means the client account records need to be complete, reconciled and explicable around May.
The work that makes that possible is not done in the last month. It is the monthly three-way reconciliation, the discipline of never letting office money sit in the client account, and records that answer the reg 6(3) questions as transactions happen rather than reconstructing them a year later from bank statements.
Who signs, and why it is not us
“Qualified auditor” is defined at EAA 1979 s.14(6) and (7) as a person eligible for appointment as a statutory auditor under the Companies Act 2006. That is a registration, not a description, and Buzz Accounting Ltd does not hold it. We say so on this page rather than letting you find out at the wrong moment.
We do the accounting. A registered auditor signs the report.
Accountants for Estate Agents
Client account bookkeeping and the monthly three-way reconciliation. The records reg 6(3) actually prescribes — payer, capacity held, the interest in land, tracked separately by property. The agency's annual accounts, corporation tax or partnership return, payroll, VAT and the management figures you run the business on. All the preparation that decides whether the report comes back clean.
Buzz Accounting Ltd is licensed by the AAT and a member of the ICPA. It is not a chartered accountancy firm and not a registered auditor.
Anstey Bond LLP
Colin Ellis, ICAEW and a Responsible Individual, audits the client account and signs the report. Regulation 8(1) of the Estate Agents (Accounts) Regulations 1981 requires a qualified auditor, and EAA 1979 s.14(6)–(7) defines that as someone eligible for appointment as a statutory auditor under the Companies Act 2006. Propertymark says the same thing for its own Accountant’s Report, citing Companies Act 2006 s.1239.
Anstey Bond LLP is a separate firm, registered for audit by the ICAEW. Companies House OC360626.
Common questions
Who is allowed to sign the report?
A qualified auditor, and the term is defined rather than descriptive. EAA 1979 s.14(6) and (7) define it as a person eligible for appointment as a statutory auditor under the Companies Act 2006, subject to independence requirements. Your ordinary accountant cannot sign it unless they happen to be a registered auditor, and most are not. Propertymark takes the same position for its own Accountant's Report, stating that for Estate Agents Act client funds the report must be completed by a registered auditor under Companies Act 2006 s.1239. We are not a registered auditor, we say so plainly, and we refer the report to a firm that is.
When is it due?
Within six months after the end of each accounting period — regulation 8(1), and the accounting period may not exceed twelve months under reg 1(2). So a 31 March period end means the audit must be complete by 30 September, not merely started. That is a shorter runway than the nine months and one day people are used to for corporation tax, and it is the reason an agency that leaves client account tidying until the statutory accounts are prepared is already late. The practical deadline is your own: the records need to be clean about a month before the auditor starts, not on the day they do.
What is a 'substantial compliance' opinion?
A narrower thing than it sounds, and worth understanding before you rely on it. Regulation 8(3) requires the auditor to report whether the requirements of the Act and Regulations have been complied with, or substantially complied with. Regulation 8(4) then confines the substantial compliance opinion to cases where the breaches were trivial, arose from clerical errors or mistakes in book-keeping, were all rectified on discovery, and caused no loss. Regulation 8(5) requires any non-compliance to be specified. A structural problem — money in the wrong account, records that cannot show who money is held for — is not a clerical error and does not qualify.
What happens if we simply do not have one?
It is a criminal offence. Section 14(8) makes breach of the clients' money provisions, or failure to produce the auditor's report, liable on summary conviction to a fine not exceeding level 4 on the standard scale. Regulation 8(9) gives an enforcement officer the right to demand the latest report on the spot. Beyond the fine, the real exposure is section 3 of the Act: the lead enforcement authority can make an order prohibiting an unfit person from doing estate agency work at all, and section 4 allows a warning order short of that. National Trading Standards confirms it issues both. A prohibition order ends the business; the fine does not.
Does a lettings-only agency need this audit?
Not this one. The regulation 8(1) audit attaches to estate agency work, so a lettings-only business is outside it. But that is not the same as having no reporting obligation. Your CMP scheme imposes its own conditions, and Propertymark for example requires an Accountant's Report annually where a member holds more than £1 million in client accounts, excluding registered insured deposits, or operates as a Client Accounting Service Provider. The accountant must belong to an FRC Recognised Supervisory Body, hold a practising certificate, and have had no connection with the company during the period. Check your own scheme's rules rather than assuming.
What makes an audit go badly?
Almost always records rather than money. The agencies that have a difficult audit are rarely the ones with a shortfall; they are the ones that cannot demonstrate, for each sum held, who it belongs to, which interest in land it relates to and in what capacity it is held — the reg 6(3) list. Client money mixed with office money for even a short period is the other one, and regulation 4 permits non-client money in the account only where it is the minimum required to open or maintain the account, or to restore funds improperly withdrawn. Everything else is a breach even if it was corrected the next day.