SMSF practitioners and trustees should pay attention to requests for information from an auditor, who while subject to more than 70 different superannuation and auditing standards, face an almost zero-tolerance policy for failing to provide that information to the ATO, an audit firm has said.
Baumgartner Super director David Burrows said details published in notices from the Australian Securities and Investments Commission (ASIC) when it takes action against SMSF auditors indicate there are still issues related to independence, but ASIC and the ATO continue to focus on compliance with the Superannuation Industry (Supervision) (SIS) Act, SIS Regulations and Australian Auditing Standards.
“The issues identified by ASIC from the review of just two auditors highlight the wide scope of the two opinions – financial and SIS compliance – SMSF auditors have to give, the technical issues on which they have to form an opinion, and the evidence requirements which are mandatory under the SIS legislation,” Burrows said in column on the audit firm’s website.
He noted two recent actions by the corporate regulator identified the auditors concerned failed to comply with auditing and assurance standards by not obtaining sufficient evidence to support the ownership and market value of property, a borrowing arrangement met applicable restrictions, collectables were appropriately stored and a fund’s claim for exempt current pension income.
The auditors also failed to obtain sufficient evidence regarding share sales and a capital gain, that some funds met the definition of an SMSF, actions were in compliance with arm’s-length provisions and assets were separate to those held personally by trustees, he said.
He added the auditors also failed to meet the standards required by not verifying employer contributions over the concessional cap or considering if a member was liable to pay tax on the excess amount, not verifying an in-house asset identified by the fund accountant, and not communicating matters to the trustees, retaining signed financial statements or issuing auditor’s reports in the approved form.
Additionally, he said the two auditors reviewed also did not obtain sufficient evidence to support compliance requirements relating to fund structures, trustee declarations, signed financial statements, keeping minutes, borrowings and investment strategies.
“The list is extensive but represents only a small selection of the issues SMSF auditors must consider,” he said.
“Remember, auditors must provide opinions on the financial statements and compliance with 20 sections of the [SIS Act] and 12 regulations of the [SIS Regulations], at the same time ensuring they comply with approximately 40 Australian Auditing Standards and a few Assurance Standards.
“The findings above illustrate to accountants and trustees why auditors must ask for information during the audit.
“There are evidence requirements under the auditing standards auditors simply must adhere to, though with a requirement for audit evidence to be sufficient and appropriate, it can be a grey area as to how much is enough.
“However, when it comes to SIS compliance, the ATO’s expectation appears to be a zero-tolerance policy, so applying any level of materiality in the design of procedures is difficult.
“Next time you receive a request for information from your SMSF auditor, please be mindful of the obligations they face and the ramifications to them, and potentially the trustees, if they fall short.”