SMSF auditors should view the quality of evidence they use to generate a report in a descending hierarchy, placing greater importance on anything sourced independently of a fund’s trustee, BDO Audit director Shirley Schaefer has stated.
Speaking during a presentation at the SMSF Association Audit Day 2025 today, Schaefer noted auditing standard ASA 500 requires SMSF auditors to obtain sufficient appropriate evidence to support their opinion, with sufficiency referring to the quantity of evidence and appropriateness covering its quality.
“Appropriateness includes the reliability of the evidence and considers the source of the evidence. How trustworthy is it? Can you rely on it? Did you go and get it yourself? Has it been given to you?” she said.
“Think about this as a ranking system with one being the best and three being the worst, although not necessarily bad, and so independent audit evidence is first.
“This is evidence that as an auditor you get yourself, such as a bank confirmation certificate or a confirmation of shareholdings from a registry, and it’s been obtained from unrelated sources.
“[Second is] third-party evidence. This is the documentation we might receive to support our audit file.
“What is the quality? How is it being provided? Do you have original documents? Do you have PDFs? Are they scanned? Are they internet reports?
“Whatever it might be, how good is that evidence, what is the source of that evidence and how reliable is that source?”
She pointed out the actions of fraudster Melissa Caddick in forging PDFs showed how easy it was to edit those files to create a false or misleading statement, and had seen this take place in a recent audit where the trustee falsified bank statements.
“Just by looking at it, I could not tell the difference between the original and the falsified document, so understand how you’re getting that information,” she added.
“Lastly is the trustee notes or minutes, as well as oral evidence, which is not banned, but you need to document that.
“Sometimes the only evidence we may get is a trustee representation letter and that may be enough in some circumstances, but you wouldn’t want to be relying solely on trustee representations for all of your evidence.”
