The ATO has expressed its apprehension over a lack of evidence being presented by SMSF auditors to support and justify their professional opinions as to accuracy of a market valuation for particular assets.
“Despite an ongoing focus and guidance on market valuations, we are still also seeing a lot of files which have next to no evidence or notes reported by the auditor in support of their view that the valuation presented to them meets the [regulations]. This is a concern,” ATO superannuation and employer obligations director Paul Delahunty told attendees at the recent SMSF Auditors Association of Australia Conference held in Sydney.
“As examples we have seen files where the valuation has been a continuation of the purchase price from many years earlier that has been accepted without any documentation or file note.
“Other files we have seen have contained old or historical valuation information with no audit file notes that can be expected to [demonstrate] the relevance or currency of the valuation in the financial year audited.”
Further, Delahunty revealed the regulator is also seeing market valuation calculations that have been based solely on one item of unsupported evidence.
He pointed out an example of this practice is the use of basic rental yields to then extrapolate a valuation of a property without any other means to support the dollar amount calculated.
According to Delahunty, this will be an ongoing area of focus for the ATO.
“This is a concern for us and we will continue to be forthright on auditors on the importance of market valuation issues as part of the audit process and be clear on our expectations,” he said.
“It is the auditor’s responsibility to obtain evidence to support the trustees’ rationale for determining the market value of each asset.
“The auditor must also document that evidence and any judgments that are made in their audit file.”