Practitioners conducting an audit on an SMSF with a property the trustees rent out on platforms such as Airbnb must assume a fraud risk is present in these circumstances, a sector specialist has said.
Seamless SMSF specialist auditor and adviser Frank La Spada explained the reasoning behind this requirement is there is often no formal lease agreement between the tenant and the SMSF due to the short-term nature of accommodation requirements involved with these types of assets.
“[In these circumstances] there is no way of us checking if the members use the property personally. [So] auditors must presume there is a fraud risk there in respect to the revenue recognition because essentially assets leased without a lease agreement in place is a fraud risk,” La Spada told attendees of a technical webinar hosted by Accurium today.
“What would most likely occur in this scenario would be a Part A qualification of the audit,” he added.
“It’s not that we know the trustees have breached any specific regulation but the assurances the auditor isn’t able to check will result in a Part A qualification.”
According to La Spada there may be situations where this type of qualification may be avoided and that is when the auditor chooses to prepare a fraud risk statement for the trustees to sign.
Accurium head of education Mark Ellem suggested this audit approach means accountants and advisers must continue to educate clients the specific compliances issues with particular types of SMSF properties.
“If the client has come to you and said we’re going to buy this property, it’s going to be I a holiday area, we’re going to use it for holiday letting, and we’re going to make more money from that [etcetera, your response should be] okay that’s fine but here are some ongoing audit and compliance requirements questions that will not only be asked in year one, but will potentially be asked, and probably asked, each and every year,” Ellem advised.
