The policing of fraud is presenting an increasing challenge for SMSF auditors in terms of both the professional standards to which practitioners must adhere and the procedures they have to employ to satisfy these obligations, a sector leader has said.
“Twenty years ago the fraud affecting our clients was a really small consideration and not something that we really dwelled on, whereas these days there are any number of frauds that can affect our clients,” Super Sphere director Belinda Aisbett told delegates during a recent seminar series.
Aisbett pointed out revenue recognition was an area the auditing standards identified as a significant risk regarding fraud and noted procedures to satisfy professional obligations now have to be multifaceted.
“The auditing standards say you can’t just do controls-based testing on revenue recognition, you have to do some substantive procedures as well,” she said.
“So even if you’re doing controls-based testing by relying on particular paperwork or systems, you still need to have some substantive procedures that overlay the top of that.”
Aisbett said carrying out procedures to determine if fraud exists within an SMSF is itself becoming increasingly difficult.
“[While] trying to request confirmations [to establish if there is a] fraud element, we get people calling us asking: ‘Are you legitimate because we’ve got this confirmation request from your office and we don’t know whether it’s fraudulent or not?’” she said.
Aisbett recommended some best practice procedures to help auditors manage the situation.
“I think you should have a work paper in your file that evaluates the fraud risk for the client and on my planning documents fraud risk is considered low for every client,” she said.
“We also have what I call my pre-audit representation letter. So we send a pre-audit representation letter to our clients that spells out the kind of things that the auditing standards expect us to know the answer to at the planning stage of the audit.
“So the pre-audit representation letter we send out, the clients sign and it talks about control and fraud and other elements.”
Aisbett also recommended auditors to not become advocates for clients and threaten their independence, while the ATO has reminded auditors to report on any ineligible attempts they uncover that sought to gain early access to superannuation.
