2011 SMSF National Conference Session 12A: How to get the most from your Auditor Shirley 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 auditors 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 funds 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