The ATO has set very rigorous criteria for SMSF professionals and trustees who are looking to prove the administration and financial reporting work for a fund is of a routine and mechanical nature, thereby allowing an incumbent practitioner to continue to perform the annual audit.
During a recent CPA Australia podcast, ATO SMSF auditor portfolio director Kellie Grant said: “To meet this requirement we will be reviewing auditors’ files and we’ll expect to see that the auditor can show evidence in the file that the trustee took on full responsibility for the preparation and fair presentation of [the] financial statements.
“This goes beyond the trustee just signing the trustee declaration in the financial statements or saying in their trustee representation letter, that they provide their auditor with, that they’ve prepared those financial statements.
“It really does mean the trustees being able to show they created all the fund transactions, basically provided a trial balance to their fund administrator to then upload it into their system, and [that] any financial statements produced will be based on those trial balance figures prepared by the trustees.”
Grant stipulated only evidence of this detail will be able to prove to the regulator the accountant or accounting firm clearly made no judgment as to how a certain item should be classified in the SMSF’s accounts.
Further, she admitted the ATO is not expecting very many trustees to have the ability to take on the responsibility of maintaining the fund’s financial records in this way.
“That’s why we expect quite a few accounting firms who conduct in-house audits will need to look at restructuring, I think, in order to avoid a breach of this independence standard,” she revealed.
She referred auditors to examples provided in the code of conduct imposing the independence standards to help them get a better understanding of the practices that would render administration services to be considered routine and mechanical.