At the recent SMSF Association Audit Day, Naomi Kewley, managing director of Peak Super Audits, said SMSF auditors are obligated to gather sufficient and appropriate evidence to support the value of a fund’s investments.
The ATO has published Valuation guidelines for self-managed super funds (QC 26343) to support SMSF trustees and auditors, and Ms Kewley said there are five key points that should be followed to ensure auditors comply with obligations under the auditing standards.
The first point is that independent valuers are not mandatory, Ms Kewley said.
“The ATO’s valuation guidelines clarify that engaging a qualified independent valuer isn’t mandatory when conducting a property valuation – that is, provided the valuation is based on objective and supportable data, it is valid,” she said.
“This aligns with SIS Regulation 8.02B and auditing standards, making it a cost-effective approach for trustees.”
Second, there are times when an auditor should seek a professional valuation, which the ATO recommends should be done when the asset represents a significant value of a fund or its nature complicates the valuation.
“When valuations are complex, professional expertise is beneficial and the ATO’s guidance provides a commonsense approach which is consistent with auditing standards,” Ms Kewley said.
“However, while heeding ATO guidelines, an auditor’s primary obligation under the auditing standards is to ensure robust evidence for asset valuations, regardless of the asset’s proportion in the fund.”
The third key point to consider is that although the ATO guidance seems to suggest an annual revaluation may not be essential if a professional valuation was conducted in the previous year, this may not be best practice.
“This appears to be in conflict with SIS Regulation 8.02B, which mandates annual revaluation, and auditing standards requiring evidence of current-year data. Despite any ambiguity, the trustee’s obligation for annual revaluation persists,” she said.
The fourth point auditors need to be aware of is the need for multiple data sources to carry out valuations.
Ms Kewley said these can include things such as comparable property values and independent appraisals.
“However, it is important to keep in mind that quantity does not outweigh quality when it comes to evidence,” she added.
“An auditor can still meet their obligations under the auditing standards and accept a single piece of high-quality evidence, provided they apply their professional judgement to conclude it is sufficient and appropriate evidence.”
Finally, auditors should not underestimate the importance of supporting data, she said.
“Whether using a real estate agent or an online service, the ATO’s expectation is that a valuation should be backed by comparable sales data or other relevant information.
“This aligns with auditing standards, which require auditors to evaluate and scrutinise the quality of an expert’s conclusions and underlying data,” Ms Kewley said.
“Although the ATO’s valuation material serves as a helpful guide, it does not override legislative requirements or auditing standards.
“Auditors must demonstrate that all evidence on file is sufficient and appropriate to support their opinion. Where ATO guidance and regulatory mandates diverge, the latter must be prioritised.”
