As the name indicates, a self-managed superannuation fund (SMSF) is a private super fund that serves retirement benefits. The main difference of an SMSF from other super funds is that you can manage the trust as a trustee for your benefit and, thus, will need to stay compliant with government policies and laws. As the trustee, you will be liable for filing annual income tax and return to the ATO. But before that, it will be vital to run an audit.
A complete audit will ensure you have maintained an accurate financial record and have remained compliant with the law. This blog discusses the importance of an auditor in SMSF management and all other details you must know.
What Laws Control SMSF Audits In Australia?
In Australia, an SMSF audit must comply with the Australian Auditing Standards and the Superannuation (Industry) Supervision Act and Regulations. These laws dictate the responsibilities of an auditor. More than 30 auditing standards apply to an SMSF, and under the SIS Act, there is a minimum of 29 sections and regulations aimed at SMSF audits.
What Are The Roles And Responsibilities Of An SMSF Auditor?
The primary role of an SMSF auditor is to check whether the fund has maintained all the superannuation standards and report any record of contravention. When an auditor detects a compliance breach, they have to undertake 7 tests to determine whether they must report the breach to the Australian Taxation Office through an ACR or auditor contravention report.
In addition, an auditor also provides an independent opinion on whether the fund assets exist. This way, they can tell whether or not the financial records are accurate. Their report on funds boosts the confidence level of the SMSF trustees.
If an SMSF auditor does not follow the standards and takes unfair means, they make themselves vulnerable to potential lawsuits and push their clients to face the court.
What Is A Terms Of Engagement Letter?
For all SMSF audits, auditors must prepare a Terms of Engagement letter, which is a formal agreement signed between the trustee and the auditor. This document includes the roles and responsibilities of both the parties and the range of an audit.
An auditor will issue a separate Terms of Engagement Letter, usually when the primary contact is the accountant and not the trustee. The reason behind it is that the accountant and the auditor work together to look after different accounting areas, and the whole thing requires additional security and protection. It has to be formally stated that no alteration can be made to all audit evidence supplied to the auditor.
As a trustee, you will need to make sure all the terms of engagement are right and are suitable to you, your accountant and your auditor. It will help you avoid any chance of misunderstanding. This is the reason why trustees have to sign this document before the audit procedure begins.
Why Does An Auditor Ask For Documents?
While carrying out the audit for your fund, the auditor may ask for a large number of documents. They do it to understand your SMSF’s operational methods and make sure your fund is compliant with the regulations.
The auditor also has to audit and sign off on the fund’s operating statement and financial statement. However, they cannot audit anything else about the SMSF as they are not included in the scope of the terms of engagement.
What Is Needed For A Good Audit?
Legal obligations bind a professional auditor, and thus they will always want to run a detailed check on each information. Important documents like the Terms of Engagement letter are involved in the audit procedure, which states the different roles and responsibilities each party has to perform.
For a proper audit, you will need to understand how the audit process is conducted and what steps are required to maintain the obligations.
Can You Switch Auditors?
Remember that you have to sign a Terms of Engagement Letter before the audit, a formal agreement between you and your auditor. So, if you want to change your auditor for not being happy with their services, you may run into trouble.
Once the audit is started, the auditor has to complete the procedure according to the audit standards. So, if you look for an opinion from another auditor once your main auditor detects a compliance breach, the ATO may start auditing your fund depending on the breach involved.
Final Words
If you want to enjoy super benefits after retirement, you must contact SMSF audit services every year to properly audit your financial records. Top-rated SMSF auditors are available in Perth who can deliver a high-quality service. However, before hiring a professional, you must check if they have an impressive record.