The checklist covers not only what is required by SMSF auditors in regard to auditor independence but also what documents the regulator expects and what it will be focussing on in regards to auditor compliance.
SMSF auditors are reminded that to maintain their independence they cannot audit their own or an immediate family member’s fund, audit the fund of a partner or employee of the firm (or a network firm), or audit the fund of an individual they have a close business relationship with unless any financial interest is immaterial, and the business relationship is insignificant.
The ATO guidelines also state that auditor independence threats must be evaluated and addressed.
These include if the fees generated from multiple SMSF audit clients referred from one source represent a large proportion of the firm’s total fees; or fees generated by a firm from an SMSF audit client represent a large proportion of the revenue of one partner or office of the firm.
Other threats that need to be assessed include if the auditor audited the fund of a close family member (parent, child or sibling who is not an immediate family member), or an individual they have a close personal relationship with (individual who is not an immediate or close family member).
Additionally, if the auditor or their firm provided taxation and/or financial planning services to the SMSF trustees or they audit an SMSF client of a former firm to which they previously provided non-assurance services.
The ATO continued that SMSF audit requirements are SMSF auditor obligations under the Superannuation Industry (Supervision) Act 1993 (SISA) and Superannuation Industry (Supervision) Regulations 1994 (SISR).
As part of its checklist the tax office said an SMSF auditor must ensure that assets reported in the financial statements exist and should look for supporting documents including purchase contracts or invoices, physical verification when possible.
In regard to ownership auditors must ensure the fund trustees own the assets reported in the financial statements and any income and expenses relate to the fund and have evidence of such with title deeds, purchase contracts, invoices, trustee declarations, rental statements, insurance contracts.
It continued that fund transactions must be complete and recorded in the correct period and auditors should cross-check bank statement transactions, invoices and receipts to the trial balance, ledger accounts and financial statements.
Transactions and events must have been recorded in the correct accounts and again SMSF auditors should cross-check asset documents such as invoices, purchase documents, share and unit certificates, bank statements with accounts in the financial statements.
Assets, liabilities, and member entitlements have to be reported at the correct valuation with independent market value documentation. For trustee valuations, check for evidence that the auditor obtained information from trustees supporting the valuation. This includes the method used and supporting documentation to show it was based on objective and supportable data.
The auditor must also ensure that the fund meets the definition of an SMSF by checking the SMSF trust deed, trustee consent forms and declarations, member accounts and directors of the corporate trustee (ASIC checks).
The ATO stated as part of the SMSF auditor’s opinion and reporting to the ATO and the trustees it will check the independent auditor’s report including that qualifications have been recorded for material misstatements in the financial reports, matters about which the auditor could not obtain sufficient appropriate audit evidence and material contraventions.
It will also check whether an ACR has been lodged within 28 days of completing the audit for all reportable contraventions that meet the ACR reporting criteria and that the trustee of a fund has been informed in writing of all identified contraventions.
