Auditing, SMSF

Courts extending audit duties

SMSF auditors duties

Legal rulings are forcing SMSF auditors to cover off issues not included in their legislative, regulatory and professional obligations.

Recent decisions made by courts of law have required SMSF auditors to address issues while performing their duties that go beyond obligations specified by legislation, regulations or professional standards, a specialist practitioner has said.

Speaking at the recent Institute of Financial Professionals Australia Conference 2023 held in Melbourne, Super Sphere director Belinda Aisbett told delegates: “We can’t advise on investments, we’re not licensed for that nor do we want to be licensed [for that]. We can comment on investments that fail the compliance rules, like [saying] ‘you’ve acquired that asset from a related party and you’re not permitted to have that asset in the fund’.

“I can’t tell you ‘oh you must be nuts to have that loan investment, that’s really risky’. But I feel like I’m obligated to tell that to my clients now.”

To address the situation and mitigate her professional risk, Aisbett revealed she is now including a management letter point for clients with assets widely considered as high risk, specifying the fact that her role as the fund auditor does not allow her to provide any form of investment advice.

“However, judges seem to think I’ve got to point this out to [clients like] ‘you have an investment that some might consider to be risky’,” she noted.

“[It could be cryptocurrency where some people] find it might be volatile, but they don’t see it as risky, whereas I have to put in my management letter some people do consider it risky.”

She acknowledged there are numerous assets and arrangements, including loans and derivatives, that also fit into this category.

“I have to point that out in my management letter just simply to protect myself from a litigation perspective,” she revealed.

“If you speak to any [SMSF] auditor, a lot of what we do these days is actually making sure that if we are sued, our audit file protects us.”

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