In accordance with section 113 of the Superannuation Industry (Supervision) Act 1993 (SIS), the accounts and financial statements of regulated self managed super funds must be audited by an Approved ASIC Auditor. The SMSF audit must provide the fund trustees a certificate on the accounts and financial statements in the approved form within the prescribed time after the year of income to which the accounts and statements relate.
Fund trustees are responsible for the maintenance of adequate accounting records and internal controls, the safeguarding of superannuation fund assets, the selection of accounting policies and the preparation of financial statements and tax return. The trustees are required to keep minutes of meetings, reports and records of changes of trustees for a period of at least ten years.
In forming an opinion on the financial statements, fund auditors will perform sufficient tests to obtain reasonable assurance as to whether:
The financial position/net assets of the fund at balance date and the results/movements in net assets for the year then ended are properly disclosed in the financial statements.
As the fund auditor, our annual compliance and audits will be planned and conducted primarily to enable us to express our professional opinion as to whether the financial statements comply with the Australian Accounting Standards (AAS) and other mandatory professional reporting requirements but, also, so as to have reasonable expectation of detecting those material misstatements arising as a result of irregularities which would have a material effect on the financial statements.
As part of the audit process, SATO SMSF Administration® may request from the trustees written confirmation concerning representations made to us in connection with the audit process. An approved fund auditor can be any one of the following:
A member of Certified Practicing Accountants Australia (CPA);
A member of The Institute of Chartered Accountants in Australia (ICAA);
A member of the National Institute of Accountants (NIA)
A member or fellow of the Association of Taxation and Management Accountants
A fellow of the National Tax and Accountants Association Ltd, or
The Auditor-General of the Commonwealth, a state or territory or a delegate of the Auditor-General.
Fund Auditor Responsibilities
A fund auditor’s responsibility is to express an opinion on the financial report based on the annual compliance audit. The financial statements must be prepared for distribution to the members for the purpose of fulfilling the trustee’s financial reporting requirements under the rules and regulatory requirements.
An annual audit will be been conducted in accordance with Australian Auditing Standards. These standards require auditors to comply with relevant ethical requirements relating to audit engagements and plan and perform the SMSF audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.
An annual audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, SATO SMSF Administration considers internal control relevant to the trustee’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion of the effectiveness of the trustee’s internal control. A fund audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the trustees, as well as evaluating the overall presentation of the financial statements.Commence Application
Annual Audit & Compliance with the Superannuation Industry Supervision Act 1993
For the years ended 30th June, fund auditors are required to form an opinion in respect of compliance with certain aspects of The Superannuation Industry (Supervision) Act 1993. Fund audit reports must refer to the following sections and regulations;
Sections: 17A, 35A, 35B, 35C(2), 52(2)e, 62, 65, 66, 67, 69-71E, 73-75, 80-85, 103, 104A, 109,121
Regulations: 4.09, 5.08, 6.17, 7.04, 13.12, 13.13, 13.14
Reporting of Significant Audit Matters
Under section 129 of the SIS Act fund auditors are required to report to trustees in writing if, during the course of, or in accordance with, our audit findings, we become aware of any contravention of the Act or Regulations which we believe has occurred, in occurring or may occur. Fund auditors are also required under section 130 to report to trustees if we believe the fund may be, or may be about to become, in an unsatisfactory financial position. As the fund auditor, if we are not satisfied with your response as trustees to the action taken to rectify the situation or they receive no such response, we will be obliged to report the matter to the Australian Taxation Office.
Where fund trustees appoint other service providers for their annual administration requirements, but would like to engage SATO SMSF Administration as an independent auditor for Annual Audit (“Only”) then the following professional fees would be applicable:
|Annual Audit fees Structure|
|Groups||Characteristics||Fees (GST incl.)|
|Amber||All investments in any of the following:||$220|
For external fund administrators wishing to appoint our organization as an independent fund auditor, all paperwork will be white labelled to protect your brand and the ongoing relationship you have with your valued clients. Under no circumstances will our organization contact your clients, whether that is by phone or email. All outstanding queries regarding completion of financial statements and tax returns will be raised and resolved with the external fund administrator. This policy ensures client relationship remains with the referring external fund administrator.
Extensive SMSF Audit Program
Provided below is a sample of an audit checklist, which our company will adhere to during the audit of self managed super funds. These issues are pertinent in forming an opinion as to the overall compliance of self managed super funds during the financial year, and could determine the nature of the audit report issued:
It should be noted that our audit procedures are designed primarily to enable us to form an opinion on the financial statements as a whole, and may therefore not bring to light all the errors or weaknesses that may exist in terms of internal controls, procedures and in the systems. It is the trustee’s responsibility to maintain an adequate system of internal control as the principal safeguard against irregularities which an audit examination may not disclose.
- Borrowings – trustees must endeavour to prevent the fund bank account from going into debit which can be observed as a breach of the borrowing rules under section 67 of the Superannuation Industry (Supervision) Act 1993. Any minor breaches should be rectified during the course of the financial year. It is recommended that trustees adopt measures to safeguard the SMSF from going into overdraft in the future to ensure compliance with the governing legislation as it pertains to the borrowing rules. Self managed super funds are prohibited from borrowing with the exception of special circumstances – such as a limited recourse borrowing arrangement. Having an overdraft facility on an fund bank account does not constitute such an arrangement;
- Diversification of Investments – any investments should be consistent with the investment strategy formulated. While investment in just one particular asset, such as direct holding of a residential investment property is permitted, trustees should consider diversifying the risk to safeguard their retirement savings;
- Fund income tax & regulatory return – the trustee’s name should reflect whether the fund is governed by individual trustees or that or a corporate trustee. Any misstatement should be notified to the Australian Taxation Office, to satisfy their reporting requirements;
- Insurance – where the major assets of a fund is held in the form of an investment property, either through a unit trust or directly, adequate level of insurance cover should be provided. This should provide prudent risk management;
- Investment Strategy – the existence of an investment strategy is required by the Superannuation Industry (Supervision) Act 1993. The importance of the investment strategy does not only lie in the requirement to comply with the Act but also represents an effective decision-making tool. In accordance with section 52 of the SIS Act, it is recommended that trustees of the fund prepare investment strategies which address issues of risk and return, diversification and liquidity, to name but a few. The investment strategy should be prepared as it relates to each member of the fund and should comply with any restrictions expressed in the superannuation fund agreement. Once the investment strategy has been documented it should be signed by the trustees and referred to in the minutes of meetings as investments are acquired or sold to ensure that such strategies are being adhered to;
- Loans to members or relatives – any funds withdrawn by members or relatives should be repaid immediately to ensure compliance with Section 65 of the Superannuation Industry (Supervision) Act 1993. Any creditors balance discovered in the financial statements need to be repaid as soon as practicable, to ensure no loans are held by the fund;
- Loans to related party – certain transactions entered into will be deemed as an in-house asset. While certain investments are grand-fathered due to transitional provisions, trustees are not permitted to maintain loans. If such loans to related parties exist, it should be arranged for all outstanding loans to be repaid as a matter of priority, to ensure compliance with governing legislation. Fund trustees are advised to refer to Section 65 of the SIS Act.
- Minutes of meetings – need to be prepared and documented as evidence trustees are actively involved in the management of the fund. This is of particular importance for the acceptance of contributions made to the fund by members and employers. In addition, annual minutes of meetings should be recorded noting the following issues:
- Summary of investment acquisition and disposals
- Summary of contributions by members and employers
- Acceptance of the financial report
- Acceptance of the income tax return
- Property valuation – every investment property should be valued at their fair market value, and not at cost or purchase price. It is recommended that a curb side valuation be undertaken by a licensed real estate agent, at least once every three years;
- Sole purpose test – self funded super should avoid investing in depreciating asset, which is not in accordance with the sole purpose of the fund to provide benefits for the members in retirement. Fund trustees should dispose of any investment in depreciating assets and consider ones that instead, appreciate over time;
- Title deed of property – any property investment purchased within the fund should be in the name of the Superannuation Fund, and not in the name of the individual members or corporate trustee. If the trustees have inadvertently used the incorrect name on the title, then a Title Deed needs to be entered into stating that such a property is in fact, held in trust for the fund, and should be signed by the directors or individual trustees;
- Title to asset – where the fund has only the one member but has chosen two individuals to act as trustees, the title of the asset should be in the name of that individual member acting in the capacity of trustee for the self managed super fund. This is very common error, but the title to assets can be easily amended to comply with the governing legislation;
- Execution of superannuation trust deed – once the fund has been established the trust deed should be properly executed. The superannuation deed should be signed and given effect to as soon as practicable to ensure compliance with governing legislation.
The auditing of self managed superannuation funds is quite in depth. If you have appointed a competence fund administrator then most of those issues can be circumvented during the course of the financial year, as opposed to leaving to end of financial year. Contact SATO SMSF Administration® today. See how our audit program can provide a financial health check on your retirement savings.Commence Application
Alternatively, trustees can apply for our SMSF audit program offline, by downloading and completing the attachment below.
Application For Fund Audit Program (Word Document)
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