Communication with trusteesCritical considerations for SMSF auditors

Communication with SMSF trustees

Disclaimer

Please note this presentation is to be considered as general advice only. The opinions of the presenter should not be relied upon as providing specific advice for you or your clients.

The information contained within this presentation is based upon our understanding of the relevant legislation, regulations and other materials as at July 2014.

Communication with SMSF trustees

Topics Covered

1. What are the auditor’s communication requirements

2. Situations requiring communication

3. Implications for lack of communication

4. With whom shall the auditor communicate

1. What are the auditor’s communication requirements

Communication with SMSF trustees

1. What are the auditor’s communication requirements

Whilst the auditor is required to form an opinion on whether:

(a) The financial report is free from material misstatement; and

(b) The trustees have complied, in all material respects, with the specified requirements of the SISA and SISR.

Do the auditor’s communication responsibilities extend beyond this?

Communication with SMSF trustees

1. What are the auditor’s communication requirements

The auditor’s communication responsibilities also include:

(a) Significant qualitative issues identified during the audit;

(b) Significant deficiencies in internal control; and

(c) Other matters of importance not presented in the financial report.

Refer page 4 of notes

What issues may fall under each of the above?

2. Situations requiring communication

Communication with SMSF trustees

2. Situations requiring communication

Refer examples on pages 5 to 10 of notes for issues that may require the auditor to communicate issues or concerns with the trustees: Example 1 – Trustee(s) history of paying non-fund expenses (p.5) Example 2 – Non Lapsing BDBN (p.6) Example 3 – Breach of trust deed requirements (p.7) Example 4 – Private unit trust investments (p.8) Example 5 – Investment strategy concerns (p.9) Example 6 – Individual trustee vs corporate trustee (p.10)

Communication with SMSF trustees

2. Situations requiring communication

As an auditor, ask yourself this question

If you identify any concerns relating to the SMSF, whether or not the concern results in a contravention or otherwise, and there exists the potential for adverse consequences for the trustees / members, do you believe the trustees / members would like to know about the concerns?

If ‘Yes’ – Include in the management letter!

Why? If not for the fact you are looking after the interests of the trustees / members - Australian auditing standards require you to!

Communication with SMSF trustees

2. Situations requiring communication

Additional matters of concern

In addition to the 6 examples discussed, what other situations do you believe, if identified, may require reporting to the trustees / members?

Communication with SMSF trustees

2. Situations requiring communication

When determining whether to communicate a matter, consider the:

(a)Intended users;

(b)Frequency of the occurrence;

(c)Materiality of the issue; and

(d)The implications for not communicating.

3. Implications for lack of communication

Communication with SMSF trustees

3. Implications for lack of communication

Consider

1. Shail Superannuation Fund v Commissioner of Taxation [2011]

2. Triway Superannuation Fund v Commissioner of Taxation [2012]

3. Tax and Superannuation Laws Amendment (2014 Measures No.1) Bill 2014, 2014

Refer pages 11 - 15 of notes

Communication with SMSF trustees

3. Implications for lack of communication

For the 2 minutes required to include in a management letter you could potentially save yourself from....

4. With whom shall the auditor communicate

Communication with SMSF trustees

4. With whom shall the auditor communicate

How many of you

(a)Communicate only with the fund’s accountant?

(b)Communicate only with one of the fund’s trustees?

Consider

Q. What are the potential consequences of failing to communicate with all trustees?

Q. Is the auditor required to communicate with all trustees?

Communication with SMSF trustees

4. With whom shall the auditor communicate

Australian auditing standard requirements

ASA 260 – Communication with those charged with governance

The auditor shall determine the appropriate person(s) within the entity’s governance structure with whom to communicate

The auditor shall communicate with those charged with governance significant matters arising from the audit.

How do you ensure all trustees receive your communication?

Conclusion – When in doubt tell the trustees

4. SMSF investments in overseas properties

Thank you