SMSF consulting firm Super Clarity has released its second information sheet for auditors and practitioners, with the latest guidance aimed at helping them better understand market valuation requirements.
The guide, created by Super Clarity director Shelley Banton, walks through the relevant standards auditors need to meet, what evidence should be provided with different assets held by an SMSF and errors to avoid.
In regard to standards, the guide states auditors must meet the sufficient appropriate audit evidence requirements of ASA 500 where they assess the quantity and quality of evidence supporting a value, and also consider if there is any uncertainty in the estimation of that value and the risk of material misstatement.
Additionally, it notes auditors must also adhere to the ATO’s general principles under which valuations must follow a fair and reasonable process, be undertaken in good faith using rational methodology and be explainable to a third party in simple terms.
The guide also addresses the issue of when an SMSF trustee or practitioner should seek an independent valuation, noting this should take place where an asset makes up a significant proportion of the total fund value, or if the valuation is complex or difficult for a non-expert trustee to substantiate, or if there was a significant event that would materially affect its value.
In regards to documentation, the information sheet suggested making it easy to understand using clearly marked out sections with relevant information.
“A practical approach is to prepare a simple ‘market valuation minute’ (one per material asset class) and attach the supporting evidence. Include the asset description (what it is, where it is, how many units/shares, ownership details), valuation date and concluding market value, and method used,” the sheet stated.
The minute should also include “objective and supportable data used (list each item) and why it is relevant/reliable, [and] a trustee statement that reflects the SIS (Superannuation Industry (Supervision)) market value assumptions (arm’s length, proper market exposure, knowledgeable/prudent parties).”
Banton, in the guide, put forward some common pitfalls and red flags to avoid.
“Using a prior-year valuation with no current-year evidence showing it remains reasonable and ‘because the accountant said last year’s value is still valid’” were listed, as was accepting trustee bias where they have pushed values up or down to manage in-house assets, contribution caps or tax outcomes.
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason