No one looks forward to an escrow audit, but they’re a part of the reality all title companies must navigate. If you’re behind on your reconciliations and documentation, though, an upcoming audit can lead to last-minute scrambles and unnecessary stress.

The great news is that getting ready for an escrow audit doesn’t have to be overwhelming. Although requirements can differ depending on your state, regulator, or underwriter, there are many common expectations that auditors generally have. In this guide, we’ll share some simple and effective steps to help you stay prepared, as well as provide ways SoftPro can help you stay audit-ready year-round.

Use the links below to jump to a specific section of this blog:

How Title Agencies Can Prepare for an Escrow Audit

• What Auditors Expect to See
• Three-Way Reconcilations
• Daily & Monthly Best Practices
• Your Audit Preparation Checklist
• How SoftPro Can Help
• Download a PDF Version of This Blog

What Auditors Expect to See

An escrow audit begins with an auditor requesting documentation, typically of the last two to three months of your reconciliation reports. At a minimum, you should be prepared to provide a complete set of core documents. These usually include:

• Bank statements for the reconciliation period

• Reconciliation summary

• Trial balance

• Statement proofing register

• Bank adjustments

• Book balance

• Outstanding receipts and disbursements
  

Auditors will also confirm that escrow trust accounts are properly labeled on bank statements, checks, and deposit tickets, as required by ALTA Best Practices.

Beyond documentation, auditors focus on issues that signal potential problems in your escrow account. This includes true money errors like negative file balances, as well as aged or unresolved items that may indicate potential process gaps or a breakdown in oversight, such as:

• Deposits in transit

• Outstanding wires

• Stale payoff or tax checks

• Aged outstanding checks

• Unidentified ledger balances
  

By reviewing these areas regularly, you’ll put your title agency in a far better position for a smooth audit.

Three-Way Reconciliations

Because ALTA Best Practices require a complete three‑way reconciliation each month and underwriters rely on it as the primary measure of escrow account accuracy, it remains the central foundation of audit readiness for every title agency.

A three-way reconciliation confirms that three key figures are aligned:

• The bank balance

• The book balance

• The escrow trial ledger balance

When these three figures match, it illustrates that what’s in your bank account aligns directly with what’s in your system, down to each individual file.

Importantly, escrow reconciliation is cumulative. This means falling behind even one or two months can create downstream inaccuracies in future reconciliations. If these discrepancies go unresolved, you may find yourself unable to quickly produce reliable reports when an audit notice arrives… meaning significant work to catch up under a very tight deadline.

ALTA Best Practices recommends completing reconciliations within 10 business days of the bank statement closing date (unless stricter state requirements apply). Just as important, the person performing the reconciliation should NOT have check-signing authority, and management should always review and approve the final results each month.

Daily & Monthly Best Practices 

Some agencies also adopt daily reconciliation as a best practice to reduce pressure at month’s end and remain audit-ready. By matching incoming and outgoing transactions to escrow books each day, you can quickly identify discrepancies while they’re still manageable. As part of these efforts, you should also:

• Match and clear routine items that don’t require further investigation

• Review exception reports for irregularities

• Monitor for stale or aging items that could create issues later 

In addition to these daily tasks, make it a monthly priority to:

• Investigate and resolve unidentified or negative file balances

• Review aged deposits and outstanding wires

• Confirm that all disbursements have cleared as expected 

This all helps ensure that lingering issues don’t carry into the future, and when these practices are performed consistently, you’re effectively audit-ready at any time.

Your Audit Preparation Checklist 

Audit preparation is far more manageable when you follow a consistent, structured approach. Use the checklist below to stay organized and prepared whenever you’re notified of your next audit:

And throughout the process, be as responsive as possible. Remember, auditors are not your enemies, and a cooperative approach makes the process run smoothly. 

How SoftPro Can Help 

All that being said, we know that accounting isn’t your core business. In fact, for many agencies, the challenge isn’t understanding these requirements; it’s finding the time to manage them alongside daily operations. Not to mention, many title professionals find it to be a tedious process that doesn’t directly drive revenue, making it easy to procrastinate.

So the question is: “Why spend your valuable time and energy on reconciling trust accounts when an expert team can handle it for you?”

SoftPro’s Reconciliation Reports and Services provide accurate and timely monthly three-way reconciliations as well as optional daily reconciliation support. With these services, you’ll receive clear exception identification and complete reporting that aligns with underwriter and regulatory expectations and supports ALTA Best Practice #2.

Most importantly, you’ll have a dedicated Reconciler assigned to your accounts.

Monthly Three-Way Reconciliation

SoftPro can perform a complete three‑way reconciliation each month, ensuring the bank balance, book balance, and escrow trial balance all match. As part of this process, our reconciler will work with your team to clear any outstanding or exception items.

Each monthly three-way reconciliation also involves preparing escrow trust accounts with complete trial balances and a detailed list of all open escrow balances, including files that are outdated or in the negative. The final results are then compiled as a set of monthly reports, which include the following:

• Escrow trial balance
• Book balance
• Statement proofing register
• Receipts and disbursements report
• Any applicable bank adjustments report

Daily Reconciliation Service

For those who want an extra layer of fraud prevention, our Daily Trust Account Reconciliation service alerts you to any irregularities in your trust accounts immediately, allowing you to quickly resolve them so you can get to your core business activities.

In addition to everything included with our monthly Three‑Way Reconciliations, you receive a day‑by‑day review of receipts and disbursements, along with the daily clearing of all items that don’t require investigation or additional information. This ensures your trust accounts are consistently aligned with bank activity

The Bottom Line  

Whether you manage reconciliations in‑house or rely on a trusted third party like SoftPro, keeping your trust accounts consistently aligned with bank activity is the foundation of true audit readiness. Remember, we’re always here to support you at every step, helping you resolve issues quickly and approach any audit with greater confidence.

Take the next step toward a stress-free audit. Get a Reconciation Services quote. 

Would you like to download a PDF version of this blog and the Audit-Ready Checklist?