Auditing guidelines on assets have not changed, says SMSFA
According to the SMSF Association, the Australian Taxation Office's position on auditors' responsibilities for verifying charges against an SMSF's assets remains unchanged.
SMSFA said in a statement on Friday that the ATO’s position has been consistent for some time.
“We have confirmed with the ATO that the Commissioner has not made any changes to its view which aligns with an SMSF auditor’s obligations as set by the Auditing and Assurance Standards Board,” said SMSF Association head of policy and advocacy, Tracey Scotchbrook.
“The ATO’s recent statements in ‘Checking for charges over property assets’ (QC 73156) does not restrict an auditor applying their professional judgement or providing alternative evidence.”
She stressed that the ATO’s compliance audit guidance on SIS Reg 13.14 states:
The auditor should obtain evidence that trustees have not given a charge over or in relation to a fund asset by seeking written confirmation from trustees and by carrying out the following checks:
- Property title search to check for encumbrances on real property.
- The Personal Property Securities Register for other parties registering interests against other SMSF assets.
The source of confusion for auditors arose from a recent addition to the ATO's auditing advice page on property assets, which suggests that auditors should now perform an annual title search, creating uncertainty.
Namely, the ATO website now states: You should obtain evidence annually that trustees have not given a charge over or in relation to a fund asset by seeking written confirmation from trustees and by reviewing the:
- property title to check for encumbrances on real property
- Personal Property Securities Register to check for other parties registering interests against other SMSF assets.
But Ms Scotchbrook pointed out that as the number of auditor referrals to ASIC continues to rise, it’s increasingly obvious that there is a misalignment between the ATO’s expectations and the practices of some in the industry.
“It is something we as a sector need to work on to bridge the gap”.
Moreover, she said that this issue also “reinforces the fact that a cursory review of an SMSF won’t meet the ATO’s expectations if the auditor is subject to a compliance review”.
“This is not to say most auditors are not doing the right thing. But it is to highlight that if auditors want to prevent a referral to ASIC, they need to demonstrate that they follow a rigorous process that clearly documents and adequately supports their opinion.”
To help lift some of the confusion, Ms Scotchbrook urged the ATO to publish articles that focus on specific compliance issues ATO officers have identified when reviewing SMSF auditors.