Peter Johnson, director of Advisers Digest, said the ATO has updated their ruling on ownership and separation of fund assets, and it is important that accountants check this as a first step.
“First, you have to check ownership. There is not a SIS standard that [explicitly] says that but there is standard 4.09A that says the trustees must keep the assets of the fund separate from any assets of theirs held personally,” he said.
“If you have one bank account with your assets and the fund assets, you have breached the standards, and it’s a reportable breach. This is there for auditors who have to have sufficient appropriate audit evidence, but if you’re an accountant, you also have to provide sufficient appropriate audit evidence to the auditor that the fund does own the assets that it says it owns.”
Johnson continued that if there is something found that may not be a reportable breach, the auditor may still find it appropriate to include that in the auditor’s contravention report section G.
He added that the separation of fund assets in s 4.09A is a reportable breach and if the amount is more than five per cent of the fund assets, if that’s the level of materiality the auditor chooses, it is reportable regardless of the size of the fund.
“If the auditor sets materiality at five per cent and the fund is bigger than $600,000, at $30,000 it’s reportable. At under $600,000 it would be at five per cent that it would be reportable,” he said.
“However, if it’s smaller, for example, if it’s a three per cent error, then you just put it in a management letter which states the fund hasn’t kept its assets separate and it needs to be fixed.”
Johnson said if an auditor requests that the an accountant does ask in a management letter for something to be corrected and it is not done, the fund will be automatically reported for a breach the next year.
“If you don’t get the letter until May which informs you that the assets have not been separated, you have to do that by 30 June or else the auditor is compelled to report you next year,” he said.
