Challenges in Conducting the SMSF Audit: Thorny Issues in Practice - 5 part on-demand webinar series

Program 1: Auditing SMSF Involvement with Trusts

SMSFs may have investments in or have entered into transactions involving a trust. As trusts can take on various forms of structure (i.e.. listed, unlisted, related, etc.), the audit requirements will vary, depending on the facts of each situation. This session explores the audit issues that can arise, including:

• Is the trust a related party and why it matters
• Auditing an SMSFs involvement with a trust:
  • how far do you go?
  • what do you need to get?
  • when do you stop?
• Obtaining sufficient audit evidence when unlisted trust investments are involved
• Practical tips for dealing with valuation issues with non listed trusts
• Unlisted trust audit issues and risk management (Cam & Bear Pty Ltd v McGoldrick [2018] NSWCA 110 & Ryan Wealth Holdings Pty Ltd v Baumgartner [2018] NSWC 1502)
• Audit issues to consider when borrowings in trusts
• Checklist for auditing investments in trusts and the different audit evidence required for:
  • listed and unlisted trusts
  • related and unrelated trusts

Program 2: How Long is a Piece of String? Auditing NALE

When some or all of a fund’s income has the potential to be taxed at the highest marginal tax rate if the fund falls foul of the non arm’s length expenditure (NALE) provisions, this presents a material risk that SMSF auditors will need to be across. This session provides guidance on the NALE provisions, including:

• Review of LCR 2021/2 (Non arm’s length income – expenditure incurred under a non arm’s length arrangement)
• How and what is the auditor required to audit?
• What audit evidence is required to confirm the capacity trustee activities were performed and why it matters?
• Accountants preparing financial statements for their own SMSF – what are the audit issues?
• What is the ATO’s compliance approach to NALE? (PCG 2020/5)
• Update on progress of government’s proposal to amend non arm’s length provisions
• Practical examples on auditing NALE

Program 3: SMSF Asset Valuations: Documentation Essentials

Whilst the ATO may have modified their approach on the extent of audit evidence considered sufficient to support the market value of certain fund assets, inadequate and missing market value documentation remains one of the main reasons SMSF auditors are being referred to ASIC. This session provides guidance on documenting market value audit evidence, including:

• Fund events that require valuations
• What information should be included in a real estate agent’s kerbside valuation?
• When should an independent valuer’s opinion be obtained?
• How often and from whom, should valuations be obtained for various asset classes?
• Use of website comparable sales provided by trustee – what further documentation should be obtained?
• Do valuation requirements differ if a fund is in accumulation or pension mode?
• Are trustees, accountants, auditors and ATO expectations aligning?
• Practical examples of audit file evidence for:
  • residential property
  • commercial property

Program 4: The Pointy Issues with Related Investments, In-House Assets and Acquisitions from Related Parties

With an SMSF needing to be administered with the sole purpose of providing retirement benefits to its members or their dependents in the event of death, any transactions that involve related parties can risk that purpose being breached. This session delves deeper into the various restrictions that apply to SMSFs and related party transactions and provides guidance to assist in ensuring any breaches are avoided, including:

• How to determine if the fund is dealing with a related party entity
• Review of sec. 66 SIS Act as it applies to:
  • in-house assets
  • breakdown of relationships
  • a contributory mortgage acquired from a member
  • the audit evidence required in each case
• Practical tips for auditing a fund’s investment in a unit trust if:
  • 100% owned by the fund
  • 50% owned by the fund
  • 30% owned by the fund and 70% by a non related entity
• The written plan requirements for in-house assets (sec. 82 SIS Act)
• Audit issues with trustees attempting to unwind in-house asset situations
• Auditing the lingering effect of Covid affected transactions, including:
  • commercial property rental below market value
• Practical examples of the trickier audit issues that can arise with related party transactions

Program 5: SuperStream: Don’t Get Caught Upstream Without a Paddle

Trustees of SMSFs must now comply with the SuperStream rules for rollovers. So, what does this mean for the SMSF auditor’s scope of work? This session provides guidance on how the audit program may need to be modified to incorporate this new requirement, including:

• What rollovers are included and excluded in the SuperStream rules?
• What are the trustee requirements when:
  • transferring funds
  • receiving funds
• What action does the auditor need to take if a contravention is discovered?
• What audit evidence should be obtained?
• Issues in practice with rollover time limit breaches
• Can trustees still use the paper process for rollovers?
• Checklist for auditing fund rollovers
• Practical examples