What an SMSF auditor actually asks for

Why the list is what it is

Every self-managed superannuation fund must be audited annually by an ASIC-approved SMSF auditor before its annual return is lodged. The auditor is testing two separate things: whether the financial report fairly presents the fund's position, and whether the fund has complied with the Superannuation Industry (Supervision) Act 1993 and Regulations. The document list follows directly from those two objectives — nothing on it is requested for form's sake.

Permanent file items

• The trust deed and every amendment, including any consolidated deed
• Trustee declarations for each member and, for a corporate trustee, the company's constitution and ASIC records
• Evidence of each member's eligibility and the fund's residency status
• The investment strategy, reviewed and dated for the year under audit
• Prior year audit report, signed financial statements and any prior year management letter

Financial audit evidence

• Signed financial statements and member statements for the year
• Bank statements covering the full financial year, including any account opened or closed
• Investment reports, share registry statements and contract notes for purchases and disposals
• Property title searches, rates notices, lease agreements and a market valuation supported by objective evidence
• Unlisted trust or company investments: financial statements, unit registers and valuation support
• Details of any limited recourse borrowing arrangement — loan agreement, bare trust deed, repayment records and evidence the terms are arm's length

Compliance audit evidence

• Contribution records with member allocation, and evidence contributions were validly accepted
• Pension documentation: commencement documents, minimum payment calculations and actuarial certificates where required
• Benefit payment records with evidence of a valid condition of release
• Trustee minutes and resolutions for the year
• Records of any related party transaction, in-house asset or related party acquisition
• Insurance policies held by the fund, if any, and the trustee's consideration of insurance in the investment strategy

The items that most often hold a file up

In practice, four things account for most delays: property valuations that lack objective supporting evidence; missing or undated investment strategies; pension minimums that were not met and have no documented rectification; and related party dealings with no evidence the terms were arm's length. None of these is difficult to prepare in advance, and all of them are painful to reconstruct in the last week before lodgement.

The timeframes that apply

• Trustees must provide requested documents within 14 days of a written request from the auditor.
• The auditor must give the independent auditor's report to the trustees within 28 days of receiving all relevant documentation.
• Where a reportable contravention exists, the Auditor/Actuary Contravention Report must be lodged with the ATO within 28 days of completing the audit.

A note on contraventions

Not every breach is reportable. The ATO applies specific tests based on the fund's age, its size, the nature of the contravention and its value. A good auditor tells the trustee or the referring accountant what has been found before anything is lodged, gives the opportunity to rectify where rectification is possible, and documents the reasoning either way. An auditor who reports without that conversation is not doing you a favour, and neither is one who quietly ignores a matter that meets the tests.