There are two key aspects to a SMSF Audit, the financial component and the compliance component.
The financial component is usually administered and audited well. In part this is because the financial records, including material from third parties, is easily available to verify transactions and balances.
The compliance component of SMSF Audit is not so well undertaken, if at all. This is where trustees face a risk. Poor records can create problems, it is up to the trustees to ensure the SMSF auditor firm performing the administration work is checking all issues.
Issues which may not be checked and noted include
An unsigned Trust Deed. Was the original ever signed? Who has it?
Confirmation the Trustee meets the residence requirements. Sometimes trustees move overseas permanently, or for a period of months. Under those circumstances the Trustee must be changed.
Signed complete Minutes. Recently I became aware of a situation where there were no minutes authorizing the payment of a pension to a member. Unaware, the member was arbitrarily withdrawing monies from the Fund.
ATO Trustee Declaration. In 2007 the ATO said Trustees must do a declaration to them. Does your find have that signed and on file?
Regardless of the price you pay, your auditor should do a complete audit, covering all the compliance elements, including those above.
Other issues important from an administrative point of view include
The trustees or administrators must separately account for concessional and non concessional contributions. If all contributions are blended together, it could result in significant extra tax being paid.
I was told of a fund where a member claimed to have paid in $400,000 as a non concessional contribution. This was some years ago and now the deposit cannot be traced and separated from the other contributions. Unless time is spend sorting through old records (pity the SMSF accountants have changed) this will result in unnecessary tax being paid.
What about the Death Benefit Nomination? Has this been signed and is a copy held in the Trustee files? There is potential for major disputes, if this seemingly small item has not been completed. It is not really a SMSF audit issue, rather one for the trustees and/or administrators.
Remember to ensure the financial and the compliance component of your SMSF audit has been properly undertaken, as well as all the other matters where trustees expect your knowledge and action.
© David Saul
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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