SMSF Audit Requirements – What to expect to provide when engaging with an SMSF Auditor.

Running an SMSF whilst can be difficult at times is made even moreso when it comes time to do your annual SMSF Audit. SMSFs are required to be audited annually and before a specified date set out by the ATO. So, what is really involved in an SMSF Audit and what are the SMSF Audit requirements?

When you first present as a client requiring an SMSF Audit, some important requirements need to be met. These are not made up requirements - they are enshrined in the standards and backed up by legislation.

I tend to ask myself questions such as:

·         Do the files look complete and in order.

·         Do the financials present well in addition to being acceptable compliant financial statements.

·         Are there permanent documents

·         Are the prior year’s financial statements included?

·         Have they been audited?

·         Did the auditor pick up on any financial audit or compliance issues in the prior year?

·         Have the accounts for the current year been signed off by at least 2 trustees or 50% of the trustees in the case of more

members.

·         If its only a sole signatory – is the trustee corporate and its sole director is signing?

·         What about me – did I find this audit challenging in the prior year? Because my pre audit checks obligate me to decline

an audit in certain circumstances.

·         Is the accountant and trustee proficient with computers and IT?

·         Are there trustee capacity issues?

·         Have there been any objections to any past requirements either with me, or even with a prior auditor. If yes – id like to

know why.

SMSF Audit requirements: The birds eye view of a complete audit process

A typical auditor’s method for conducting an SMSF Audit tends to be as follows:

1.      We conduct a pre audit check

2.      We plan an audit

3.      We perform the audit procedures

4.      We query the client or We conclude on an audit

In amongst the above is how an auditor comes to know what SMSF Audit Requirements exist for your super fund audit – which ill explain below:

Accountants & SMSF Professionals - when it comes to engaging with Simply SMSF Audits you need to provide:

·         A Trust deed & any amendments – complete, signed dated witnessed

·         ATO Trustee Declarations (originals) – wet ink signed dated and witnessed

·         Investment strategy prior to and in the current year of audit

·         Any other permanent documents you have

·         The above encompasses the super fund’s permanent suite

·         We then look at the Financial position, statement of income, notes to the financial statements – are these signed off by

the trustees as previously stated?

·         Members statements – separated by superannuation interest (i.e Accumulation interest, pension interest 1, pension

interest 2 etc)

·         Trial balance and ledger accounts and annual minutes too.

·         Investment summary report, investment income report

·         The SMSF Annual return – aka the funds tax return – filled out completely – but typically auto generated.

·         Pension commencement | commutation documentation

The above should easily be generated by the superannuation accounting software employed.

Engaging an SMSF auditor involves the audit engagement letter signed by 2 trustees – must be read prior to.

Trustees represent that all relevant legs and reg have been met by them – we provide you this template to sign.

Prior years financial statements if the fund existed and produced required reports in the prior year.

Audit report and management letter for the prior year.

Looking closer to the source evidence required looks something like this:

·         Bank statements

·         Listed security statements | Broker Reports | Registry Holdings statements

·         Unlisted entity financial statements, security certificates, security register, evidence of underlying assets

·         Real estate valuation and ownership evidence

·         Term deposit statements

·         Cryptocurrency statements or other evidence

·         Loan agreements

·         Collectable and Bullion statements

·         Limited recourse borrowing arrangement deed

·         Borrowing statements and agreement from the lender

·         ATO Portal Tax reports

·         Actuarial certificates where pensions are involved

·         Investment income source evidence such as dividend | Distribution | Tax statements | Interest summaries etc

·         Lease agreements | Rental income statements or summaries

·         Rollover in reports and ESA reports

·         Any contribution related info

·         All larger expenses i.e Accounting | Property | Investment management fees | life insurance

·         Rollover out statement and ESA report

·         Other evidence as required

Now, the above is not exhaustive and a lot of the above may not be relevant for your clients smsf – you cannot produce rollover in statements if there was no rollover for instance. This is also true for specific compliance documents if they simply did not exist.

The audit process is complex and thorough. Only through experience and professionalism can an SMSF Auditor quickly clarify what you need to provide exactly, and what is missing.