A superannuation lawyer has identified the failure to make written acknowledgements of specific procedures performed in an audit file as the most common error made by practitioners.
“[The biggest failure is when] the auditor has done a good job, they’ve done the work, they’ve asked the right questions, they’ve gone through the right process, they’ve thought about it, but they haven’t made a notation on their [audit] file,” DBA Lawyers special counsel Bryce Figot shared with attendees of The Tax Institute National Superannuation Conference in Sydney last week.
Figot recognised some practitioners may argue Auditing Standard ASA 230 Audit Documentation allows oral explanations to be used to explain the auditor’s thinking if the ATO decides to scrutinise their audit files, but advised against relying on this professional guidance as it would complicate the regulator’s process.
“Instead of letting it exist in your head, write it down,” he advised.
He pointed out practitioners providing low-fee audits are likely to be the most susceptible to this operational flaw.
“This is a little bit concerning for low-fee auditors [because] how much time does [their operation] allow them to make a file note of a conversation? It’s going to be hard [for them],” he said.
According to Figot, the documenting of market valuations in an audit file ranks as the second most common failure among the practices of SMSF auditors.
“Among the clients I’ve had, market valuations are almost always an issue,” he noted.
Further, he identified the lack of signed financial statements as an issue. To this end, he cautioned auditors to be mindful of situations where a one-page approval of the fund’s accounts exists, but the actual financial statements have not been signed off.
In light of this scenario, BDO superannuation partner Shirley Schaefer reminded auditors of one particular obligation they need to satisfy.
“You have to have a signed set of accounts before you issue an audit report. How on earth do you determine compliance with section 35B [of the Superannuation Industry (Supervision) Act], that you’ve got a set of signed financial statements, if you don’t have them before you issue your audit report?” Schaefer said.
“I know it sounds really boring, but it is something that I have seen in some of my quality reviews.”
