What Auditor Looks for & Provides

A SMSF must be audited to ensure that the fund is meeting its conditions for being SMSF. The following is a guide of what Auditors looking for, must or and may provide:

• Before commencing the audit a Audit Strategy/Plan (ASA300) which includes any significant changes during the year and the scope of the audit and may include:
  1. Focus on non arms length disclosures made in the income tax return.
  2. Breach/potential disclosures made in the income tax return.
  3. Whether the fund was wound up
  4. Comparative analysis of Balance Sheet (statement of financial Position)
  5. Comparative analysis of Income Statement
  6. member accounts
  7. legal advice if any
  8. trustee minutes (kept for 10 years)
  9. assessing audit risk (ASA315)
• Provide a Engagement Letter appointing themselves as Auditor to the fund.
• Provide a Trustee Representation Letter
• Provide An Audit Opinion on the financial reports of the Super Fund <see ATO Link – Approved Audit Report>
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• Provide An Audit Opinion on Compliance of the Super Fund (compliance with the SIS Act) – SMSF ATO Audit Report 
• Contravention Report – if the fund has contravened the SIS act and consequential management letter (reporting to trustee pursuant to s129SIS).
• Consider factors to determine whether a contravention warrants a Audit Qualification include <ASAE 3100> such as, potential to mislead users of the report and potential harm to members to name a couple.
• Financial Report Audit should focus on the material balances and transactions but be mindful of:
  1. Assess Materiality of a SMSF (ASA320), 5% of net assets of the fund can be used but can be different depending on the circumstances. The purpose is to avoid a qualification (issuing a less than 100% correct opinion) for small trivial breaches.
  2. Sampling – sometimes the auditor may test every transaction other times it may be 5%.
  3. Focus on the following within the financial report:
     1. Contributions
     2. Investments/assets
     3. income/expenses
     4. benefits paid; and
     5. other considerations
• Balance Sheet Testing
  1. Existence – Inspection of assets eg title search of property, share statements, copy of financial reports of unlisted investments, exotic investments sight receipt, insurance policy with investment noted on policy, include in trustee rep’n letter, sight loan agreements, etc
  2. Ownership– Examples include: title search of property/shares to verify name is same as the trustee’s name, copy of unit/share certificates in unlisted investments or audit confirmations sent directly to the trust/company,
  3. Completeness – Examples include:  Confirmations/statements from 3rd parties – Bank accounts shareholdings, re-calculate number of shares based on dividends received and confirm with share holding statement. Obtain copy of unit/share register of unlisted entity, etc
  4. Valuation – Examples include: 3rd party assessments, share statements & re-calculate share values, bank confirmation, real estate agent assessment of value, calculate value based on % of shareholding/unitholding of unlisted entity by total net assets of the unlisted entity, check notes to financial reports of unlisted entity for valuation methodology, exotic investments, check Independant. Valuation Report’s required minimum 3 yearly where not available monthly (ATO Super circular 2003/1). Review Loans (if any) recoverability.
• Subsequent events after the year end 30 June but before completion of the audit.
• Income Statement (operating Statement) for each item, for example contributions:
  1. Occurrence – existence of a rental property meaning rental income should be received (occurred).
  2. Completeness – no unrecorded amounts (bank accounts reconciled)
  3. Cutt-off, (received by the fund by 30 June)
  4. classification & (eg concessional/non concessional)
  5. Accuracy tested. (compliant with trust deed and sis act)
• special attention to:
  1. Exotic investments – valuation, use and should comprise a small part to avoid a further closer audit.
  2. Real property (title seaches https://www.globalx.com.au/; and google maps to view property re vacant land, residential or commercial, etc.)
  3. Unlisted investments
• Enquiries – includes verbal or written responses
• Documents – checked to evidence transactions
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