Auditors lift process intensity

SMSF auditors

SMSF auditors have upped the intensity of their focus since the ATO sent out letters last year questioning the investment strategies of some funds.

A specialist SMSF document provider senior executive has observed an intensification of scrutiny from auditors since the ATO sent out 17,700 letters to trustees last year querying the investment strategies of their funds.

“Some of the auditors I’m dealing with are almost going through the audit process with a fine-tooth comb now,” LightYear Docs chief financial officer Michael Jeffriess told attendees at the organisation’s 2021 Virtual Strategy Summit this week.

However, Jeffriess noted the additional focus auditors are demonstrating appears to be a risk mitigation exercise for themselves as opposed to achieving a better result for the client.

“There seems to be a lot of scared auditors out there in the SMSF space at the moment due to some of the case law that has come out and certainly from an administration perspective it is making life more [difficult],” he explained.

Jeffriess said auditing concerns have been raised over templated SMSF investment strategy documents.

However, with regard to trustees, he pointed out the ATO letters seemed to be having a positive influence.

“With the funds I do administration for it’s been enlightening to see the number of trustees who have sat up and are actually reading [the investment strategies] now and actually trying to understand their investment strategies, which is great,” he said.

Jeffriess puts some of the renewed interest in investment strategies from SMSF trustees down to the fact there is more detail and documentation to which they can refer.

“They are actually taking care [over the investment strategy] and wanting to be part of it,” he noted.

Jeffriess added it was significant how far this aspect of SMSFs had progressed.

“In the early days when I was [new to] the space and for many years it was a one-page investment strategy [consisting of a] templated document spat out with just four or five different high-level asset classes, zero to 100 per cent [allocations that were automatically signed off],” he said.

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