In light of the two SMSF auditor cases this year, Cam & Bear Pty Ltd v McGoldrick and Ryan Wealth Holdings Pty Ltd v Baumgartner, SuperConcepts executive manager of SMSF technical and private wealth Graeme Colley said that SMSF practitioners and their clients will need to be much more thorough with the type of information they provide on investments to auditors.
These cases concerned the thoroughness at which auditors look at the underlying investments made by the super fund, he said.
“Next year, advisers and trustees will be required to provide more thorough and comprehensive information to auditors so that they’re satisfied that the fund has made an investment which is recoverable,” Mr Colley said.
“That’s really important, because if the auditor is not satisfied or they can’t see that it’s recoverable, then they’ll likely qualify the accounts of the fund, fill out a contravention report and let the ATO work out whether the investment is recoverable under the operation of the SIS legislation.”
Mr Colley said that a lot of practitioners and trustees probably aren’t aware that more complicated SMSF investments such as related party arrangements or syndicate arrangements, where it’s difficult to determine the underlying assets, may require more work in terms of justifying the investment to the auditor.
“We’re already starting to see auditors become much more thorough in what they’re doing. We recently had one auditor that wanted a feasibility study from a developer concerning a land development arrangement that the superannuation fund was going to enter into,” he said.
Some SMSF auditors may also potentially become pickier about which SMSF clients they will provide audits for.
“Some may want an easier life and decided not to take on funds with [these types of] investments because of the extra difficulty,” he said.
“Or they may continue to take on those arrangements, but they’ll be more likely to qualify the accounts and bring it to the attention of the commissioner if the liquidity or recoverability of the investment is difficult to determine.”
Lets do an audit every three years as well. Great idea. Even better idea…. let do SMSF audits for a guaranteed price of
$300. Very difficult space to be a professional in at the moment.
Auditors often ask for info and accountants refuse to give it then they intimidate, bully and threaten auditors, we need an ATO register to report deceptive and questionable accountants. On another note does this mean anything questionable we value at zero because there is no certainty of recoverability? So if you have a $5 million fund just loan $4 million to a friend then start a pension under the TBC with $1 million then recover the loan in a years time and bingo, $5 million into pension phase. That is what anonymous proposes…because often there is no way to ascertain recoverability so rather than qualify amend the financial reports.
As I understand it, both of these cases were considered a failure to perform the financial audit correctly. If the financial audit had been performed correctly, the issue would have been raised and the financial reports amended. No contravention report required. All that is required is for the auditor to do their job in the first place.