Auditors reminded to check trustee status

The ATO has reminded SMSF auditors they need to check if a trustee is disqualified after finding this is a common oversight among practitioners.

In an update on its website, the regulator stated its reviews continue to identify cases where auditors miss disqualified trustees or fail to report them correctly during SMSF audits.

“We see some common mistakes. These include relying only on the trustee representation letter or a tax agent, not checking the relevant registers, assuming we already know or deciding not to report because the trustee has lodged an appeal or the fund is winding up,” the ATO stated.

“Red flags during the audit should prompt you to check further. For example, you may identify signs of personal financial difficulty or serious contraventions of the Superannuation Industry (Supervision) (SIS) Act 1993. In these cases, do not rely on written representations alone.

“If you identify a disqualified person, qualify Part B of the independent auditor’s report and lodge an auditor contravention report.”

Last week, the ATO updated its guidance on auditor requirements for conducting Part B of an SMSF audit, which includes the requirement to check if a trustee is a disqualified person, noting section 126K of the SIS Act prohibits such an individual from being a trustee of any super fund.

The guidance stated auditors were to check no SMSF trustee was a disqualified person by seeking a written representation from each individual trustee or director of a corporate trustee confirming they are not a disqualified person, or the directors of a corporate trustee confirming the company is not otherwise a disqualified person.

“Seek independent verification of trustee status for new clients and periodically for continuing clients where a trustee does not provide a written representation [and] where information identified during the audit gives you reason to doubt the representation,” the ATO added.

“Independent verification can be achieved by searching any or all of the following registers, depending on the trustee’s circumstances: our Disqualified Trustees Register to see if we previously disqualified an individual, the Australian Financial Security Authority Bankruptcy Register or insolvency and bankruptcy information, the Australian Securities and Investments Commission (ASIC) banned and disqualified register for people who cannot manage a corporation and ASIC’s published notices to see if a provisional liquidator or restructuring practitioner now manages the fund’s corporate trustee.”