ATO, Auditing

Part A qualifications off ATO radar

Part A qualifications

SMSFs with Part A qualifications in their annual return should check why they occurred as not all issues need to be reported to the ATO.

SMSFs that have changed auditors in the past year should not be concerned about receiving Part A qualifications on their fund due to a lack of evidence relating to the opening balance of the SMSF in that year, according to a technical expert.

Heffron head of SMSF technical and education services Lyn Formica said in cases such as these SMSFs can even go so far as to ignore the qualification as the ATO will not be interested in the auditor’s view about the lack of opening balance evidence.

Speaking as part of a Heffron/BGL webinar earlier today, Formica highlighted changes made to the SMSF annual return, including amendments to questions relating to Part A and Part B audit qualifications, noting the ATO had changed its focus on the information it was seeking.

“We still have a question which asks if Part A and Part B of the audit report has been qualified,” Formica said.

“What the ATO has done, however, is state in the instructions that if a fund has a Part A qualification, and if the only reason for that qualification is because the auditor has insufficient opening balance audit evidence, you can ‘pretend’ you don’t have that qualification and can say ‘no’ to that question.”

She said a lack of opening balance audit evidence was likely to take place where a fund has changed auditors in the preceding year and the current auditor does not have the audit evidence so may not be comfortable with signing off on the opening balances.

“If the only reason [for the qualification] is in relation to opening balance audit evidence, the ATO does not want to know about that,” she said.

She also noted the regulator had changed the requirements about the reporting of rectifications for Part A qualifications and would only require information relating to Part B qualifications.

“Last year, we had the situation where we had to indicate if Part A or Part B qualifications had been rectified, which was unusual as for much of the time Part A qualifications don’t get rectified,” she said.

“The qualifications are the result of things such as the SMSF auditor not being able to audit the underlying investment wrap.

“The ATO have seen the light and are now only asking if Part B qualifications have been rectified, which means less data going to the ATO and less funds on the list that need to be reviewed.”

The ATO flagged the changes to the Part A and B qualifications in mid-2019, stating the inclusion of Part A audit qualifications would be used to build a clearer risk profile of the SMSF population.

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital