SMSF Audit Under Pressure: Navigating Complexity, Compliance and Risk: 5 program recorded series

Program 1: Audit Complications for Investments in Unlisted Companies and Unit Trusts

One of the more problematic aspects of an SMSF auditor's obligations is often when the investments involve fund ownership of shares or units in unlisted companies or trusts. This session aims to assist with the complexities of auditing those type of investments, including:

• Issues in practice that auditors face when dealing with unlisted shares and units
• Dealing with unlisted entity financial statements that an SMSF has an interest in, prepared using historical cost, including:
  • whether the SMSF auditor has to verify the existence of the assets owned by the unlisted entity
  • whether a previous market valuation of the shares or units provided by a trustee is past its use by date
• Audit implications if the unlisted entity the SMSF has ownership in has borrowings
• Type 2 audit reports and “white labelling” - what is sufficient and when does one auditor’s liability stop?
• Suggested documentation to be obtained to satisfy audit evidence requirements for unlisted shares and unit investments
• Checklist of audit processes which could be followed when dealing with shares or units in unlisted companies or trusts
• Dealing with the challenge of obtaining sufficient audit evidence with audit cost blowout issues
• Practical examples

Program 2: The ATO’s Watchlist: Lessons from Under the Microscope

What really happens when the ATO reviews an SMSF auditor? In this session, a lawyer who regularly represents and advises auditors undergoing ATO review/audit, will share insights, highlighting key areas of focus, common pitfalls, and the lessons they learned. This session will provide valuable insights into how auditors can prepare for potential scrutiny and refine their processes to align with ATO expectations. Topics include:

• The ATO’s key areas of focus in SMSF audits and how they assess auditor compliance
• Non-arm’s length arrangements: what raised concerns during the review and how to approach them
• Income diversion to SMSFs - real-life examples of what the ATO is watching
• Market valuations: where auditors get caught out and how to ensure accuracy
• Detecting illegal early access and pension income miscalculations before the ATO does
• Related-party loans: when they cross the line and how to mitigate risks
• Auditor independence: lessons from recent suspensions and disqualifications
• ATO scrutiny of high-volume auditors tied to a single SMSF administrator
• Practical strategies to ensure your audit processes withstand an ATO review

Program 3: The Death of an SMSF Member - An Auditor's Perspective

With superannuation balances increasingly becoming the major portion of a person's wealth on death, the SMSF auditor needs to ensure their processes are adequately addressing the audit issues on the death of an SMSF member. This session reviews those processes, including:

• Auditing the trustee changes and issues that can occur on the death of an SMSF member
• Auditing the death benefit payment, including the extent of audit review of:
  • any binding death benefit nomination (BDBN) in place
  • any trustee discretion applied to determine death benefit recipients
• Death benefits paid to a person who was in an interdependent relationship with the member, including:
  • review of the ATO's interdependent relationship checklist 
  • the tax impact on the dependent/non-dependent categorisation
  • to what extent the auditor should review eligibility?
• A member with a BDBN and a fund deed that allows for a reversionary pension on death - which takes precedence?
• Checklist of audit processes covering death of a member and suggested documents to obtain to satisfy audit evidence
• Case law examples

Program 4: Beware Fraudulent Documentation - It's Getting Harder to Identify

The Caddick case (ASIC V Caddick [2021] FCA 1443) is a stark reminder for SMSF auditors that audit verification may need to go beyond accepting the documentation provided by fund trustees and advisors. This session drills down on the audit processes required to assist with ensuring fraudulent documentation doesn't catch out the auditor, including:

• Why auditors were in the firing line as a result of the Caddick case
• The processes the auditors involved in the Caddick case could have performed to avoid a successful negligence claim against them
• How the evolution of digital technology is making it harder to detect fraudulent documentation
• What SMSF auditors should be looking out for when it comes to documentation provided from trustees and their advisors
• Audit processes to assist with confirming existence and market valuations of assets listed on documentation from trustees and advisors
• Auditing emerging digital investments in unlisted unit trusts to avoid a repeat of the Caddick scenario
• Review of independence - when the quantity of audits performed comes from the one source of referral (i.e. accountants, financial advisors)
• Does the auditor’s PI insurance cover associated litigation costs?
• Balancing the “ATO is looking for more from auditors” perspective and the SMSF audit fee pressure dilemma

Program 5: Auditing Acquisitions from Related Parties: Compliance, Risks and Best Practices

As there are restrictions in place for an SMSF acquiring assets from a related party, it's important that not only the SMSF auditor be across what those restrictions are, but also the implications that can arise if an appropriate value for the acquisition isn't used. This session explores the topic, including:

• What an SMSF can and can't acquire from a related party
• The entities that fall under the category of related party
• Acquisitions from related parties and interaction with the in-house asset rules
• The implications if market value isn't used for an acquisition from a related party for:
  • asset acquisitions
  • services performed for the fund by a related party (TD 2021/5; LCR 2021/2)
• Audit procedures to evidence that market value requirements are satisfied
• Audit issues with acquisition of business real property (BRP) from related parties, including:
  • the types of property being acquired that may arguably not satisfy the BRP definition
  • determining at what point of time the status of BRP is tested
• An audit checklist for acquisitions from related parties
• Practical examples (SMSFR 2009/1)