I have been asked about my reaction when a client (or referring accounting firm) complains about my proposed audit fee.
I Get Cross
I expect like most, my initial reaction is to be annoyed. “Here we go again.” I consider with my special processes, IT tools and trained staff, I can complete an audit in a price effective manner. So I feel it is as though the client does not respect my skills and team.
Then I Consider, In Part It Is My Problem
My next reaction is to consider, “maybe it is my problem, for not properly educating trustees and other accountants about the necessary steps for a professional audit”? So I asked someone, “how do I communicate what I do”. They told me to “concentrate on the value” I create when I complete a SMSF Audit.
“Let Me Tell You What You Need From a SMSF Audit”
Instead of instantly responding on price, it has been suggested I say “Let me tell you what you need from a SMSF Audit”. “You need to know all the assets of your SMSF are there, invested where you thought they were, held in the proper name, are protected (insured and safely stored) and, where appropriate, earning income.” In addition I could say “I also need to be sure the assets are not used for personal purposes” and are proper assets to be held by a SMSF.
In summary, SMSF Trustees need to know where they stand in relation to their compliance with the Superannuation Industry (Supervision) Act (SIS). It is surprising some Trustees don’t hold a signed Trust Deed. What if many years later this is needed and cannot then be located? In order to protect the Trustees, all SMSF should have an adequate Permanent File.
I am not too sure if I should scare SMSF Trustees and accountants, but there are some horror stories out there. There are a few SMSF where, when the auditors went to check assets, they found the assets had been removed, indeed stolen. In one case I heard of, by a family member without the knowledge of the trustees.
Talk About the SIS Act?
Should I explain the Federal Government legislation has been set up so as to protect the SMSF assets, given the special tax benefits which apply? The Federal Government, through the SIS Act allows tax free monies to be used to build assets separate from a business. Investments are made in a protected environment. As a consequence, the SIS Act requires adequate accounting records, internal controls and the safeguarding of assets.
When I Sign Your Audit Certificate
I explain, “when I sign an unqualified audit Certificate and conclude there are no contraventions, I am giving the SMSF a clean report”. “Whenever I sign an audit certificate, my personal assets are on the line.” “I am required to carry special professional negligence insurance.” “I use my professional knowledge and judgement and maintain adequate systems, so as to conduct the necessary tests, and that costs money.”
How Much Is At Risk?
Sometimes I quantify the amount of money at risk. So I say “You have $1.4 million in your SMSF and if for some reason the Australian Taxation decide your SMSF is non-compliant, then that amount will be at risk”. I go on to explain, if we do not properly protect your SMSF, the Trustees could be hit with ATO penalties. If someone has stolen assets from your fund, you need to know now, not much later.
Your Special Assets
Sometimes I am able to refer to special assets held in the fund such as collectibles, property, etc. I then go on to explain it is the Trustees decision to invest in those asset classes, rather than more conventional investments. Given that, the assets require additional audit steps. So the audit costs more, as a result of the Trustee’s decision.
© David Saul – Saul SMSF
David was among the first professionals to be accredited through SPAA as an SMSF Specialist Advisor™. He is also a Chartered Accountant and holds a Bachelor of Financial Administration from the University of New England, Armidale NSW.
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