2011 SMSF National Conference

Session 12A:

How to get the most from your AuditorShirley Schaefer

BDO

2011 SMSF National Conference

How to get the most from your Auditor• Auditor Relationships & Independence• Audit documentation• Auditor Contravention Reports• Rectification of Contraventions

2011 SMSF National Conference

Auditor Relationships & Independence• APES 110 “Code of Ethics for Professional Accountants”• Auditors to be independent from their clients• Independence of mind & in appearance• Identification of threats to independence

“threat that the auditor may inappropriately issue an unqualified audit opinion”

2011 SMSF National Conference

Auditor Relationships & Independence• Not an adversorial role• Get to know your auditor

– Their systems & procedures– Their documentation requirements (checklists)– How to resolve queries/conflicts

• Use them as a technical resource

2011 SMSF National Conference

Auditor Relationships & Independence• Auditor communications

– Engagement letters– Trustee representation letters– Reporting to trustees at the conclusion of the audit– Reporting to the ATO

2011 SMSF National Conference

Audit Documentation• AUASB “Australian Auditing Standards”

– The auditor “shall”

• ASA “Audit Documentation”– Evidence from third parties– Original vs copies– Physical vs electronic– prepare audit documentation that can be understood by an

experienced auditor

2011 SMSF National Conference

Audit Documentation• Sufficient appropriate evidence to support the auditor’s

conclusion– Bank Statements– Evidence of asset acquisition & valuation– Evidence of income & expenses– Contracts/leases– Private investments– Exotic/collectible assets– Contributions– Benefits & pensions

2011 SMSF National Conference

Audit Documentation• First year audit documentation

– Trust deed– Member/trustee declarations, applications & nominations– ATO registration– Minutes of meeting– Investment Strategies– Prior year financial statements & audit report (signed)– Prior year auditor correspondence

2011 SMSF National Conference

Auditor Contravention Reports• Compulsory ATO Reporting

• Does the fund meet the definition of a SMSF (s.17A)?– If No – compulsory reporting

• Is the fund < 15 months old at year end?– If yes, compulsory reporting of ALL contraventions

2011 SMSF National Conference

Auditor Contravention Reports• Compulsory ATO Reporting

• Has the trustee previously received advice of a contravention that they have breached again?– If yes – compulsory reporting

• Is there an identified contravention from a previous year that has not been rectified at the time the audit is being conducted?– If yes – compulsory reporting

2011 SMSF National Conference

Auditor Contravention Reports• Compulsory ATO Reporting

• Did the trustee fail to meet a statutory time period by more than 14 days?– s.35C(2) – provision of documents to auditors within 14 days of a

written request– s.67 – borrowing for more than 7 days to settle securities

transactions or 90 days for surcharge or benefit payments– s.82 – preparation of a written in-house-asset plan before the end

of the next financial year

2011 SMSF National Conference

Auditor Contravention Reports• Compulsory ATO Reporting

• Did the trustee fail to meet a statutory time period by more than 14 days?– s.104A – new trustees must sign a declaration within 21 days of

appointment– s.126K – immediate notification to the ATO is required where a

trustee becomes a disqualified person– reg 7.04 – contributions that must be returned to members

required within 30 days

2011 SMSF National Conference

Auditor Contravention Reports• Compulsory ATO Reporting

• Is the total value of contraventions (ALL) > 5% of the total value of the fund’s assets?– If yes – compulsory reporting

• Is the total value of contraventions (ALL) > $30,000?– If yes – compulsory reporting

2011 SMSF National Conference

Rectification of Contraventions• Advise your client• Discuss a rectification plan• Have the client rectify the contravention ASAP

2011 SMSF National Conference

Rectification of Contraventions• Contact the auditor immediately• Provide evidence to prove the rectification

– Bank statements– Signed agreements– In house asset plans– Correspondence

2011 SMSF National Conference

Rectification of Contraventions• Provision of financial assistance

– Pay interest to the fund

• In house assets– Preparation of an IHA Plan

• Trustee forms/declarations not completed– Get declarations signed

• Contravention may not be avoidable