Unlike most other entities, in addition to preparing financial statements and the tax return, an SMSF is also required to be independently audited. The audit reviews the financial aspects – covering things like existence, value, recoverability, classification etc as well as compliance aspects – covering off whether the SMSF Trustees have complied with specific rules for their SMSF.
As an SMSF Administrator for clients of Accountants and Advisers, a part of our service is co-ordinating the Annual Audit.
One of the things we do at the end of every SMSF lodgement season is to analyse the audit queries we had for the season. Audit queries are best avoided as they impact on the auditor relationship and they mean more time, more client interaction and less profit. After we analyse them, we revise our processes to try to avoid more audit queries in the next year.
Here’s some examples of the documents an SMSF Auditor wants to see:
Documents to support Existence and Classification
We find the easiest approach is to simply get together all the supporting documents for transactions that happened in a financial year. Some examples include:
Bank Account statements
Term Deposit statements
Broker Statements
Wrap Statements
Shareholding Statements
Property Title Searches
Unit Certificates for unlisted trusts
ASIC extract for unlisted shares
Loan Agreements
Crypto screenshots at 30 June
Bullion photos with newspaper to showing the date
Collectibles photos with newspapers showing the date
Life insurance policies
Documents to support Value
The valuation for many investments, like Listed Shares, Managed Funds, Bullion etc are readily available and already feeding into the SMSF Accounts software. But there are some SMSF investments that require documents to support their value and these include:
Property – a Property Valuation Report including comparable sales is required, this can be from a real estate agent, online valuation platform or in limited case or if preferred a formal valuation as long as it reflects market value at 30 June
Unlisted Unit Trusts – usually a copy of the Financial Reports, however, in many cases the underlying investments may not have been revalued so further evidence from management such as recent unit sale information may be required
Loans - proof of subsequent repayment or a statement regarding recoverability may be required
Collectibles – a valuation report by an independent valuer or other evidence to support the value
Documents to support Compliance
There are many compliance rules that an auditor is required to review. Some of the documents that can help an auditor with their compliance review include:
Bank Accounts/Term Deposits – providing the bank/term deposit account statements not only supports existence, it also shows the name in which the account is held
Broker/Wrap Statements – having GS007 internal control audit reports that the auditor can rely on
Direct Shareholding – providing the Holder Identification Numbers (HIN) and postcodes allows the auditor to check both the existence and the name in which the investment is held
Property Title Searches – as well as showing existence, they can also show if the property is held in the correct name and if mortgage or other caveats etc are recorded on the title
Lease Documents – show the parties to the lease and that the terms are arm’s length
Lease Appraisals – at the time leases are renewed support that the rental amount is at arm’s length
Limited Recourse Borrowing Loan documents – including the terms that show that the loan is limited recourse
Regulation 13.22C Unlisted Trusts – the auditor determines SMSF compliance by doing an unofficial audit of these trusts so all the supporting documents for the trust’s transactions are required to be provided to them
Loan Agreements – show the parties to the loan and that the terms are arm’s length
Crypto – linked cash account screenshot to show that the account is in the name of the SMSF Trustee
Bullion – details regarding insurance and storage
Collectibles – details regarding insurance and storage to show compliance with specific legislative requirements
Life Insurance policies – showing the owner as the SMSF Trustee, the insured as one of the members and the amount insured
Trustee Company ASIC Extracts showing current directors
Updated Investment Strategy – reflecting the current state of the funds including details for all the members and investment considerations for all the investments currently held
It saves everyone time and money if as many of the supporting documents the auditor needs can be provided to them upfront.
At Keep It Simple Super we value working with our clients to ensure simple processes and simple outcomes. If you want to avoid complex and costly outcomes for your clients, speak to us today to get access to our award winning SMSF Administration service.
Comentários