Practitioners need to have a good understanding of their obligations in handling client monies and make sure they carefully apply the standards.

“All standards are important, but understanding your ethical obligations and your obligations around management of client monies is of the utmost importance,” says Rebecca Stickney, head of CA ANZ’s professional conduct team in New Zealand.

“Disciplinary bodies come down pretty hard on failures involving client monies.”

Upcoming update: PS-2 client monies (effective 1 January 2026)

Practitioners should review and apply the relevant standard – PS-2: Client Monies in New Zealand and APES 310 Client Monies in Australia – and ensure they periodically re-read it to ensure they identify any updates. In New Zealand this is particularly important because the standard has been updated, effective 1 January 2026. Details about the upcoming changes are available here.

Set clear engagement protocols

Client monies are defined as any monies the accountant controls that are the property of the client and to which the accountant doesn’t have any entitlement. Monies held in a trust account are the obvious example, but they also include clients’ bank accounts to which the practitioner holds an authority to transact, typically so they can pay invoices and manage payroll, and so on.

The fundamental obligation when it comes to client monies is to ensure CAs only deal with those monies through a trust account or client bank account, and in accordance with the client’s agreement and instructions.

“You should have procedures around engagement and receipt of instructions; for example, to make sure that you know the client and instructions are authentic and the timeframes for execution of the instructions,” says Kate Dixon, Australian conduct leader, CA ANZ.

This means that practitioners ensure they verify the client (in New Zealand, members must also comply with anti-money laundering requirements). They must also ensure they are only taking instructions from the client and no-one else, including having a way of verifying that the instructions actually come from the client, Dixon says. They should not take instructions over the phone and should be careful of unfamiliar email addresses.

“If you’ve got any reason to suspect that an instruction to deal with funds is not from the client, you should find a way to double-check it,” she says.

Engagement protocols are also important, ensuring that these clearly identify the person or persons from whom instructions can be taken, such as certain directors or executives within a company. For instance, if an individual was the practitioner’s client, the practitioner would need permission in writing to take instructions from their spouse or partner. This usually forms part of the initial engagement document.

Conflicts of interest

“Divorces and shareholder disputes can be a danger zone,” says Stickney.

A case heard by the Disciplinary Tribunal in New Zealand highlights the risks relating to instructions and how client monies cases can intersect with conflict-of-interest breaches. The member’s clients were a couple who ran a company together and were divorcing. They asked their accountant to manage the monies in their joint business account and make payments on instructions from both parties. On one spouse’s instruction, the member made a payment towards the purchase of a vehicle, which was disputed by the other spouse. The member was on notice of the dispute. The Disciplinary Tribunal found the member had acted without instruction and failed to manage the conflict, and censured the member.

“Sometimes members can be stuck in the middle of an impasse between clients or not have clear instructions. Without instructions, members should not act. Instead, they should write to the clients and set out what instructions are required and the consequences of not receiving them, which might be that no action will be taken. Members also need to be cognisant of conflict-of-interest management in such circumstances,” explains Stickney.

Beware common tripping points

Along with ensuring they only act with clients’ instructions, CAs must keep client monies separate from the member’s funds and not deal with client monies in any way that is advantageous to them. For instance, bank interest on client monies should be attributed to the client.

Practitioners are also required to disperse client monies in a timely fashion. In Australia, it is three business days, while the New Zealand standard isn’t so prescriptive about timeframes but requires that client monies not be held for any period longer than is reasonably necessary to discharge the purpose for which they are held or received.

In a case in Australia last year, a CA ANZ member was struck off by the Disciplinary Tribunal after the tribunal found that a practitioner, who also became insolvent and whose practice entity also suffered an insolvency event, did not deal with client monies through a trust account or client bank account, and did not disperse the monies within three business days of receipt of instructions.

The Australian practitioner who didn’t appropriately deal with client monies also fell afoul of another requirement for managing client monies – that the trust account be audited.

Practitioners handling client monies need to have their compliance with the requirements of APES 310 audited annually, within three months of the financial year-end. In New Zealand, practitioners must appoint an auditor to perform an audit of client monies activities at the request of the New Zealand Institute of Chartered Accountants (NZICA). Practitioners’ trust accounts are subject to inspections by NZICA on demand, including as part of practice review.

From January 2026, practitioners will also be required to have prescribed monitoring procedures in their systems of quality management in respect of client monies activities. Members are also required to reconcile their trust accounts and provide regular statements to clients. Practitioners can sometimes fail to meet these types of administrative requirements because they are unaware of them and at other times because they just don’t get around to it. The disciplinary bodies generally do not find such explanations acceptable.

Another area for practitioners to watch out for is the withdrawal of their fees from accounts with client monies. While the withdrawal of fees from client monies isn’t prohibited, the rules governing how to do this are extremely prescriptive and need to be followed very carefully. This can only be done in accordance with the client’s written instructions. Even with authority, there are specific rules about notifying the client that the practitioner is making a withdrawal and the timing of it.

Sometimes mismanagement of client monies isn’t deliberate but inadvertent, such as disbursements paid to the wrong account due to inadequate record keeping or error.

Dixon says the disciplinary bodies still take even an inadvertent error seriously.

“There’s actually no excuse for inadvertence, really, because you're dealing with client monies,” she says. “So, it’s important to be rigorous about it and understand your obligations.”

Help and support from other CAs

Remember, if you’re unsure about your responsibilities relating to client monies, need advice on managing a conflict of interest or you’re facing disciplinary action, you can contact the CA Advisory Group for confidential advice from a senior CA.

What are client monies in accounting?

Client monies are funds controlled by an accountant that belong to a client, such as amounts held in a trust account or client bank account for payroll or supplier payments.

What is PS-2 Client Monies in New Zealand?

PS-2 outlines how accountants in New Zealand must handle, safeguard and report on client monies, including requirements for trust account management, audits and quality controls.

What is APES 310 Client Monies in Australia?

APES 310 sets out the Australian requirements for holding and dealing with client monies, including trust account audits within three months of year-end and clear reporting obligations.

What happens if client monies are mismanaged?

Disciplinary bodies treat mismanagement of client monies seriously. Breaches can result in censure, suspension or removal from professional membership.

Can accountants withdraw fees from client monies?

Yes, but only with written authority from the client, following specific timing and notification rules under PS-2 or APES 310.