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ATO issues guidance on qualified audit reports

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By Keeli Cambourne
November 01 2024
1 minute read
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The ATO has issued guidance to SMSF trustees on why auditors may issue a qualified audit report when SMSFs use an investment management service organisation.

The regulator said SMSFs may hold investments where a service organisation maintains responsibility for managing the underlying assets. Examples of these investments include WRAP accounts, individually managed portfolio services or platform investments.

Under these arrangements, generally, the SMSF does not hold the assets directly – they are held by a custodian on behalf of the SMSF.

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It continued that at the annual SMSF audit, auditors will request evidence to confirm the assets in the fund’s financial statements. For assets managed by a service organisation, it can be difficult for auditors to confirm ownership of the asset. This may be the case even when an annual investment statement and other audit documents are provided.

Furthermore, where the auditor's opinion is that there is insufficient evidence to verify ownership of the asset, they will qualify part A of the Independent Auditor's Report (IAR), which relates to the financial side of the audit. In this scenario, a part A qualification may be unavoidable even though the SMSF trustees may have complied with all their obligations.

The guidance stated if an SMSF auditor has qualified part A of the IAR, trustees should discuss this with the auditor to understand why and what it means for the fund.

Guidance Statement GS009 Auditing Self-Managed Super Funds covers audit considerations when SMSFs use investment management service organisations. Auditors may avoid a part A qualification where sufficient evidence is obtained per ASA 402.

The Joint Accounting Bodies (JAB) have issued a FAQ: Audit considerations relating to an SMSF using an investment management service organisation. This explains that in some cases, it's possible to obtain sufficient appropriate audit evidence, but there is no one-size-fits-all approach.

Additionally, the regulator has also issued information about the importance of SMSFs lodging their accumulation or retirement phase values correctly in the fund’s annual return.

It stated that accumulation phase value (APV) or retirement phase value (RPV) must be lodged on the SMSF annual return at X1 and X2 fields (member information), otherwise members may not see an accurate figure when viewing a total super balance (TSB) in ATO online services.

If a fund’s TSB isn't accurate in ATO online, the regulator has advised trustees to check their SMSF annual return to ensure all fields were completed.

A zero TSB amount displayed could mean:

  • The ATO doesn't have any information for the financial year

  • The amounts reported to the ATO by a fund/s for TSB purposes don't equal the account balance reported on its annual statement, or

  • A fund has reported the APV as a different or zero amount

For more information, visit Super transfer balance account report instructions or what needs to be reported.

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