The value of assets is even more crucial as SMSFs prepare for their end-of-year reporting, said Paul Rafton, national leader, superannuation for BDO.
“Understanding the complexities of the SMSF audit process is paramount to ensure your fund is compliant,” Mr Rafton said.
Mr Rafton said in the wake of the high-profile Caddick case and the missing millions there are key considerations and specific requirements that apply to SMSFs and trustees can do several things to assist their auditor and avoid delays or qualified audit reports.
“Managing an SMSF means complying with a range of regulatory requirements, including the need for an annual audit,” Mr Rafton said.
“This audit is designed to ensure that the SMSF is being managed in accordance with the Superannuation Industry (Supervision) Act 1993 and other relevant regulations.”
He said one of the most important things a trustee can do to support the audit process and avoid delays is to maintain transparency, accuracy, and proper documentation in financial reporting.
“That means maintaining clear and accurate records,” he said. “Keep your financial records well-organised and up to date. This includes financial statements, ledgers, bank statements, invoices, contracts, and any other relevant documentation,” he said.
“Ensure that financial reports are prepared in a timely manner and are free from errors. It’s also important to comply with accounting standards and follow the relevant accounting standards and regulations that apply to the SMSF.”
He continued that segregating assets is a must.
“Implementing proper segregation of assets between your SMSF and personal/business assets is paramount to ensure the fund complies with the SIS Act,” he said.
“A trustee must also provide supporting documentation and be prepared to provide supporting documents for all significant transactions and account balances. “
He said the auditor will most likely request evidence to verify the accuracy of the fund’s financial statements.
“In particular, providing copies of investment reports and distributions as soon as they become available will assist in the audit process,” he added.
Finally, the auditor will also require the trust deed and governing rules so it is imperative the trustee ensures they are up to date.
“By following these guidelines, you can contribute to a more efficient audit process and reduce the likelihood of qualified audit reports or delays,” he said.
“If an SMSF’s annual tax return is not lodged with the ATO by the due date, the fund will have its regulated SMSF status removed and will not be able to receive contributions or rollovers until the fund’s lodgements are brought up to date.”
Paul
SIS Act and regulations – AAS specifically GS 009 stipulate what a Trustee and auditor must do – I cannot see how Melissa Caddick’s case is going to change anything for SMSF Auditors or will require them to collect additional evidence.
In the MC case, Unqualified audit reports were issued by auditors based on the evidence provided. Independent 3rd party checks are mandatory and were not done and the Trustees relied on the audit reports and believed their funds are intact with MC -which they were not as MC used some of these monies for her expensive shoes/ bag collection and for her wedding dress.
For example, if a fund Trustee (Administrator) provides a shareholding statement – the auditor must verify the holding with the share registry – simply relying on a pdf file of shareholding statement is not enough.
Since 5 separate auditors were involved in auditing several SMSFs over a number of years – either MC subscribed to a very sophisticated PDF editor or the auditors did not do their job properly – we will soon find out…
In my opinion the problem lies in low audit fees as there is not enough allowance in the fees to conduct these mandatory checks and this problem will continue till another 2,000 auditors are out of operation.
ATM it is very difficult for a $600 audit fee charging auditor to get many audits. The current rate is half and audit feild work done by these auditors is also half. However many good auditors are charging $600 or even more – but are too busy to take on more work
To weed them out ATO must shift their focus from large audit firms to low-fee-charging auditors.
Not all SMSF trustees are part of the financial world. Often audit queries can be perceived as a lack of trust or even an insult.
It’s important the SMSF trustees understand that their fund is audited every year, that the audit is also on behalf of the ATO and that it is compulsory for the auditor to report issues.
Too many accountants and advisers receive the audit report, then (hopefully) pass it on to the trustees. It’s important that trustees are not shielded from this. Too many SMSF trustees dont even know they have an annual audit.
The auditor should communicate directly with the SMSF Trustees when issuing the audit report, not through intermediaries.
No doubt those unscrupulous accountants and administrators that mark up and collect extra on the audit fee would disagree!