SMSF Auditor Compliance
There are relevant auditing standards which apply to SMSF compliance audits. These standards are:
- * ASAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
- * ASAE 3100 Compliance Engagements.
Compliance audits are carried out in order to form an opinion relating to five crucial areas:
- * That the fund meets the required definition of an SMSF and has elected to be a regulated fund as per SISA s17A.
- * The sole purpose of the fund’s maintenance is to provide benefits to its members upon their retirement, or to their dependents should death occur before retirement.
- * The trustees have an investment strategy which complies with the investment restrictions laid out in SISR. 4.09.
- * The trustees comply with benefit and contribution payment standards and SISR 6.17/7.04.
- * And that trustees are performing their required administrative obligations as according to SISR s103.
There is always the risk that a breach of the SIS Act and Requirements may not be detected by the auditor. For this reason, it is important that the audit procedures are thoroughly planned and designed to cover the entire financial period, as well as specific compliance tests relating to relevant SISA requirements.
The regulations set out in the SIS legislation represent a minimum set of audit requirements for compliance. Auditors are able to expand the scope of an audit as they see fit (perhaps based on risk and other factors), but the audit must meet these minimum requirements in order to comply. An SMSF’s trustees should be consulted when determining the scope of an audit.Reporting obligations for the financial statement and compliance audits
Under the SISA, an SMSF auditor is required to:
- * Provide an auditor’s report to the trustees detailing the SMSF’s operations for the year. The report must be in an approved form.
- * An auditor will be required to submit a written report to a trustee if that auditor forms the opinion that:
- * Any contravention of the SISR or SISA may be occurring, have occurred, or be likely to occur in the course of the SMSF’s operations.
- * The financial position of the SMSF is unsatisfactory, or is likely to become unsatisfactory.
An auditor will be required to submit a written report to the ATO if the auditor forms an opinion that:
- * A contravention is likely to have occurred, be occurring, or occur in the future, and that this contravention is of the requirements of the SISR or SISA specified in the ACR by the ATO.
- * The SMSF’s financial position is, or is about to become, unsatisfactory.
An audit contravention report should be used when submitting the above written report. These forms are available on the ATO website.
The ATO has also published an auditor checklist (Approved auditors and self-managed super funds – role and responsibilities as an approved auditor) which sets out the responsibilities of approved SMSF auditors according to the SIS Act and Regulations. It offers a concise guide to the way in which the ATO expects audits to be conducted.
If a fund was established on or after July 1 2008 and has committed a reportable contravention in its first 15 months of existence, the auditor must report the contravention to the ATO regardless of the amount involved. This ensures that new trustees become aware of their responsibilities and obligations at an early stage.
Trustees are to be provided with a management letter which details the findings and implications of an audit on their fund.
A management letter should include details of any contraventions of the SISR or SISA as well as recommendations as to how these mistakes might be rectified by the trustees.
Any weaknesses in internal controls identified by the auditor should also be reported to the trustees (even if they are not necessarily breaches of the legislation or requirements) so that they are able to improve their administrative procedures and systems where required.