Valuation guidelines for assets within an SMSF need to be revised to remove a conflict with superannuation regulations regarding how often an asset should be valued, a situation that is leading to trustees challenging an audit, according to the head of an SMSF audit firm.
Peak Super Audits managing director Naomi Kewley said the requirement for SMSF auditors to operate under Superannuation Industry (Supervision) (SIS) Regulations and auditing standards when considering evidence for the valuation of an asset at market value was currently at odds with ATO guidance on this matter contained in QC26343.
Kewley noted SIS regulation 8.02b required that an asset must be valued at its market value each year, but this was contradicted in the ATO guidance, which states that where a trustee chooses to obtain an external valuation for a fund asset, they do not need to have a valuation done each year, but may consider it if a significant event changes the asset’s value.
“This is my biggest grief with this QC’s guidance and I kind of did a double take when I first read this. I struggle to see how these comments support the legislative requirement to value an asset each year,” she said during a presentation at today’s virtual SMSF Association Audit Day.
“I also struggle to see how this guidance supports the auditor’s obligations under Audit Standard (ASA) 500 to test any assumptions and to evaluate a data set associated with the experts valuation.
“Let’s face it, the data in a prior-year professional assessment is going to relate to the prior year.
“All assumptions made by the valuer will relate to another period and, as auditors, we can’t assume that either the data set or the assumptions are going to be at all relevant for the next year.”
She said auditors were unable to determine if there was a significant event impacting a property’s value without a current valuation and trustees, who are required to state if there had been any change, were often unable to determine that without a valuation.
“ASA 580 tells me that as an auditor I cannot rely upon trustee representations on their own as audit evidence in any matter and to sign off on regulation 8.02b and obtain sufficient appropriate audit evidence as required by ASA 500, I must obtain a supported valuation every year.
“I’m a little exercised over this part of the QC because it is causing misunderstanding and it is not the administrators fault as they should be entitled to cite ATO guidance to their SMSF auditor.
“So please ATO take another look at this sentence in the QC. This may not be the way that it was intended to be interpreted and it’s hard for auditors to fight on our own to maintain the integrity of regulation 8.02b.”