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Risk grows with SMSF sector size

The risk of SMSFs being targeted for fraudulent activities increases in conjunction with the growth of the sector, placing greater onus on accountants and auditors to put procedures in place to protect their clients from the actions of criminals, according to a fraud prevention specialist.

“Accountants and auditors have a really big role to play in the prevention and protection of fraud,” Worrells Solvency and Forensic Accountants partner Sharlene Anderson told the recent Chartered Accountants Australia and New Zealand National SMSF Conference 2014 in Sydney.

“We need to educate our clients on the potential dangers and educate them on how to avoid some of these things.”

Anderson suggested accountants and auditors needed to apply a higher level of scepticism in regard to SMSF activity as fraudulent activities on the whole were becoming more and more sophisticated.

“Be on the lookout with a level of scepticism that is appropriate. Don’t just assume things are low risk,” she said.

“Everyone is telling you super funds are low risk and SMSFs are low risk.

“I’d much rather say they’re high risk and be proven wrong. Look at them critically because as the SMSF pot grows, so does the risk.

“It’s a numbers game and sooner or later one of us is going to have a client that is going to become a number.”

She pinpointed investments in managed funds as the one real area of concern at the moment.

“You put your money into a managed platform and you know the face of that platform is a company you’re familiar with and you know what’s going on,” she said.

“But that money then just goes out to how many other places as they diversify that portfolio and how do we know what happens after that? How do your clients know what’s happened?”

She implored auditors to adhere to the audit standards in those situations to ensure every step had been taken to detect any wrongdoing.

“Go back to the audit standards and the requirements to check the managed platforms and get the audit reports from the internal controls,” she said.

“Cover yourself and at least make sure you’ve got everything you need because most funds have money in these areas and if the money turns out not to be in the managed fund, you want to be able to put your hand on your heart and say ‘I did everything I could do to make sure the situation was okay’.”

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