Regarding ethical clearance letters, Ms Moffitt noted that APES 110 Code of Ethics for Professional Accountants has a mandatory requirement for an ethical clearance letter to be sent in respect of audit engagements.

APES 110 also stipulates members must reply to professional correspondence and enquiries promptly. However, in absence of a response, auditors should use their professional judgement in deciding whether or not to proceed with an engagement.

Ms Moffitt also noted the frequency of the engagement letter is not defined but that the auditor should use their professional judgment when a new letter is required.

An engagement letter may need to be reissued in certain circumstances, Ms Moffitt said, including where there is a change in trustees, a significant change in the nature or size of the SMSF, or an indication that the trustees misunderstand the objective and scope of the audit.

Bank confirmation is not mandatory when auditing cash balances, Ms Moffit said, adding that the decision as to whether or not to obtain a bank audit certificate should be based on the circumstances of each individual SMSF.

An SMSF auditor is not required to assess whether the SMSF’s investment strategy is adequate or appropriate to meet the investment needs and expectations of the trustee and SMSF, Ms Moffitt said.

However, she confirmed that under ASA300, an auditor is required to establish an audit strategy, and that planning is a “continual and iterative” process.

Addressing the issue of fraud, Ms Moffitt said auditors should remember that fraud is always intentional and will involve concealment or misrepresentation.

“Fraud is discovered by looking at patterns, oddities and exceptions and often is in small monetary amounts,” she said.

“A fraud will not be picked up through substantive procedures alone as it will not identify if a transaction is missing or invalid," she explained.

“Always maintain an attitude of professional scepticism, which involves making critical assessment validate the audit evidence, and remember that the trustees are in a position to override otherwise good internal controls.”