SMSF accountants and auditors faced with static market valuations for assets inside a fund should question the lack of change in those from year to year, but not do the work of assessing the value themselves, an SMSF legal expert has advised.
DBA Lawyers special counsel Bryce Figot said the ATO’s recent announcement that 16,500 funds had unchanged asset valuations for three consecutive years meant there was a greater focus on the work of accountants and auditors in signing off on SMSF annual returns.
“The ATO said there were more than 1000 approved SMSF auditors associated within this high-risk population and its data showed that no auditor contravention reports (ACR) were lodged for potential breaches of the market valuation rules for the assets,” Figot said during a recent webinar hosted by the legal firm.
“I can tell you from first-hand experience, and the ATO have stated this publicly, but market valuation is a big deal, particularly insufficient evaluation of the evidence of market value.”
He added auditors and accountants should be proactive in questioning asset values and raising that with their clients or the ATO.
“Auditors, if the value on the financial statements is the same from one year to the next, lodge an ACR,” he said.
“I do a lot of work representing SMSF auditors who have been audited by the ATO and none of them get in trouble for lodging ACRs; they get in trouble for not lodging ACRs.”
He highlighted the regulator was not looking for auditors to provide evidence of market value, but that they have assessed the evidence provided by the trustee and are able to show their assessment.
“The ATO quick code reference QC45566 provides a minimum expectation for auditors, but in a practical sense they might want to have wording along the following lines in their work papers,” he said.
“’I have checked the trustees have valued fund assets at market value when preparing the accounting statements for the fund for the income year being audited.’
“’I have done this by determining how the trustees have valued the assets and obtaining evidence to support the valuation,’” he said, adding auditors could then list the methods trustees used to value the assets and the supporting documentation provided.
“Accountants, what can you do to make it so that an auditor is not in a sticky situation?
“Be really wary of SMSF financial statements with the same value from one year to the next. If you are submitting to audit a financial statement with the same value from one year to the next, maybe the financial statement is wrong.”
