A senior financial services executive has reminded auditors of the rigours to which they must adhere in relation to the valuation of cryptocurrency holdings inside an SMSF as stipulated by the ATO.
“[Cryptocurrency assets held by an SMSF] have to be reported at market value in the fund’s financial statements and [the valuation has] got to be supported by independent evidence. So, in other words, holding statements or summaries alone are not enough. Auditors will need to verify the valuation,” Institute of Financial Professionals Australia head of technical services Natasha Panagis told attendees of a recent quarterly update webinar.
“For example, it could be [done] by using the 30 June closing value published on the website of the crypto-exchange that provides that historical data and the auditor will need to document their conclusions reached on the fund’s compliance with these requirements in their audit file.
“But importantly the ATO notes if that crypto is held through a custodian or an exchange, auditors do need to obtain a Type 2 [audit] report where available and they must still perform substantive testing to validate those holdings.”
Panagis pointed out if auditors cannot verify the cryptocurrency in question belongs to the SMSF or is reported at market value, they will need to qualify both Part A and Part B of the audit report if the holding is considered material.
“And where the reporting criteria applies, then they must lodge an ACR (auditor contravention report) for a [Superannuation Industry (Supervision) Regulation] 8.02B breach,” she said.
She also took the opportunity to cover off other ATO tips in reference to the audit of SMSF cryptocurrency assets.
“[Auditors] have got to check that the [holding of] crypto is permitted under the fund’s trust deed, that it aligns with the fund’s investment strategy and the trustee has obviously considered the risks [of the holding] and how the investment supports the members’ retirement goals,” she explained.
“They’ve also got to check the crypto is held and owned by the fund. In other words, [the asset] is stored in a digital wallet in the fund’s name separate from any crypto held by the trustees or members.”
