Auditing, Property

Annual valuation requirement clear

SMSF annual audit auditor property asset valuation

Regulations outlining the requirement for the annual valuation of an asset are clear cut and should not lead to confusion around what auditors are required to do.

SMSF auditors concerned about the requirement to ensure a property asset is valued annually should not get ahead of themselves with concerns about the mechanics of the valuation or its implications for the fund, but ensure it is objective and supported by evidence, according to an audit practitioner.

Peak Super Audits managing director Naomi Kewley said Superannuation Industry (Supervision) (SIS) regulation 8.02B covered the valuation of assets and since 2013 onwards mandated that when preparing accounts and statements required by section 35B(1) of the SIS Act, an asset must be valued at its market value.

Two requirements jump off the page here. The first is market value. An asset must be valued at its market value,” Kewley said during a session at the recent SMSF Association Audit Day.

“When must this happen? Well, ever since 2013, every subsequent year of income when preparing the accounts and statements,” she said, echoing similar statements made by ATO superannuation and employer obligations director Paul Delahunty at the same event.

She also pointed out the regulation was clear in what it required, but also what was unnecessary from an auditor’s point of view.

“The regulation has nothing to say about how the market value of an asset is to be established. The type of evidence required to support a market valuation, who’s going to value the asset – there are no comments,” she said.

“The regulation also has nothing to say about the importance of valuing one asset over another, so all assets must be valued annually.

“Finally, the regulation has nothing to say to evaluate the importance of a valuation in one year over another. Is the fund in pension phase or the accumulation phase? Are the members near their caps or not at all? It’s not relevant.

“As an auditor, I don’t need to know how valuation is or is not going to affect the members’ financial affairs. I’m just looking at the evidence.

“Give me an objective and supportable valuation every year and I’m going to sign off on this regulation. Fail to provide me with an objective and supportive evaluation of a material asset at 30 June and the fund is in trouble in my book with this regulation.”

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