Trustees urged to provide audit evidence

SMSF trustees audit evidence

SMSF trustees have been reminded auditors will only work with the ievidence they are provided and valuation issues are their responsibility.

SMSF trustees have been reminded that while auditors will make assessments as part of their annual report, the shape of that document will depend on what evidence is provided and trustees have an onus to provide accurate and up-to-date details for the audit process.

BDO Australia superannuation partner Shirley Schaefer said the annual audit process was a regulatory requirement for SMSFs and property and unlisted investment assets made that process more complex, requiring either more work for trustees or their fund auditor.

“One of the concerns for auditors when it comes to property investment is valuation. Trustees are required to ensure that all investments and assets are carried at market value each year, which necessitates an annual assessment of market value,” Schaefer said in an update on the BDO Australia website.

“In some situations, investments such as property may not experience significant changes in value from year to year. However, recent changes to superannuation regulations, the COVID-19 pandemic, and the current housing shortage have influenced property values.

“If you believe the value of your property has not changed in the last 12 months, you can seek confirmation from a property agent or valuer to support this sentiment.

“As your auditor is not a property expert, if you do not provide the required information to ensure the valuation is appropriate, they may source this information themselves, which could increase the cost of the audit.”

She said there had been a surge in private equity investments, including private trusts, companies and private debt arrangements, as SMSFs sought higher returns on investments and auditors would also be seeking critical information regarding these investments.

“Auditors must determine whether the investment is connected or related to the SMSF, its members or relatives,” she said, noting the restrictions that exist in the level of SMSF assets that can be invested in an investment related to the trustee, fund members or their family members.

She also noted that valuing these investments was challenging due to their unlisted nature and the limited number of transactions that occur within them, and trustees should clarify with their fund auditor what documents are required and what information was relied upon when making valuations.

“We recommend confirming with your auditor the information they need to form an opinion on your assessment of the market value of these assets,” she said.

“A trustee minute documenting what you have assessed to form your opinion of value is always a good starting point. If the investment is a private debt arrangement, the auditor will also need to understand how you assessed the recoverability of the investment.”

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital