Auditing, Compliance, SMSF

Disclaimers can reduce audit risk

Auditor disclaimer

SMSF auditors need to provide their clients with a disclaimer stipulating the aspects of the fund that have not been examined to lessen litigation risk.

A legal expert has recommended SMSF auditors provide their trustee clients with disclaimers as to the elements of the fund that have not been scrutinised as part of the year-end audit as a form of legal protection for themselves.

Coleman Greig taxation and superannuation consultant Peter Bobbin noted the decisions made in recent legal cases have made including a disclaimer as a standard declaration of an SMSF audit a must.

“The Cam & Bear and Aussiegolfa cases tell us [the court expects you] to look at not merely what’s on the balance sheet, but [also that] you’re looking at what is behind the balance sheet. So as a minimum make sure your disclaimers refer to this,” Bobbin suggested.

“If you don’t look behind the balance sheet of the SMSF, throw in some super huge disclaimers that stipulate you’re not being paid to do that and you’re not doing that.”

Further, he said the disclaimer should state if the year-end audit is to examine the underlying investments contained in the fund’s balance sheet, then the trustee and the accountant referring the work need to specifically issue an instruction to do so, as well as agree to pay an additional fee for that type of service.

According to Bobbin, including a disclaimer in the audit procedure is particularly important when the underlying SMSF investments involve complex structures such as shares in a private company or units in a private trust.

However, he acknowledged a disclaimer cannot act as the perfect form of protection against litigation for auditors.

“I’m not saying it will be perfect. But if I was an auditor, I would [provide] a disclaimer and if it works for me or helps, that would be great,” he said.

“There is a point where if you overdraw a definitive disclaimer, it won’t work. But I’d rather have it than not have it.”

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