Preview Questions Legal Cost Auditor | Role Specific Skill

Question 1: What role do "client payment terms" play in billing compliance, and how should a Legal Cost Auditor ensure they are followed?

Which action should you take?

Choose only one option

Payment terms are irrelevant as long as the client eventually pays

Payment terms should be adjusted to suit the firm's cash flow needs

Payment terms should be reviewed to ensure they are in line with the client's contract, and billing should reflect the agreed-upon schedule and amounts

Payment terms should be disregarded if the client is a long-time customer

Question 2: What is the importance of "client agreements" in billing compliance, and how should a legal cost auditor ensure that invoices align with these agreements?

Which action should you take?

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Client agreements only apply to high-value cases, not routine ones

Client agreements should be disregarded if the firm is billing at standard rates

Client agreements are irrelevant if the client is satisfied with the final invoice

Client agreements outline the terms for billing, and the auditor must ensure that all charges, rates, and terms align with what was agreed upon

Question 3: What method should a Legal Cost Auditor use to review the distribution of legal costs across multiple billing categories?

Which action should you take?

Choose only one option

Ignore category breakdowns and focus only on overall costs

Use standard distribution percentages across all cases without considering specifics

Review the categories superficially and focus only on total billings

Analyze the distribution ratios over time, adjusting for case complexity and billing guidelines

Question 4: How should a Legal Cost Auditor assess whether a law firm's profit margin is reasonable?

Which action should you take?

Choose only one option

Accept the reported profit margin without comparing it to similar firms

Compare profit margins against industry standards and consider the firm's size, location, and specialization

Use historical data from the firm's past performance without benchmarking

Focus solely on total revenue and ignore cost structures

Question 5: When auditing a law firm's billing practices, what is the first step in verifying compliance with ABA's billing guidelines?

Which action should you take?

Choose only one option

Assuming compliance unless a client complaint is made

Reviewing client complaints and adjusting the billing system

Reviewing the law firm's billing policies and comparing them with ABA guidelines to identify discrepancies

Relying on the attorneys' knowledge of the ABA guidelines without an audit

Question 6: What is the accounting treatment for client trust funds held by a law firm?

Which action should you take?

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Classified as a revenue until earned

Classified as part of retained earnings

Classified as a liability of the firm

Classified as an asset of the firm