We don’t (add interest) but then we don’t hold monies for long enough, if at all to accrue any interest. Unless the transaction has exchanged with a completion date within the next 7 days we would always return funds.
The problem is that returning the funds to the client for them to have to turn round and send them back a few weeks later causes extra hassle for the client which is I guess why you are keeping them but “client convenience” is not a reason to hold the funds and could be seen as “acting as a bank” I believe?
The auditors will pick a sample to test different areas it may be that this matter flagged for interest but they weren’t testing it for funds helds. Were the sale proceeds being held on the sale ledger or the ongoing purchase?
Hope this helps?
Sarah
