What’s involved in an SMSF audit?
The purpose of the SMSF audit is to complete a thorough financial and compliance audit. The ATO has strict rules about how funds should operate, and the audit is an essential part of making sure the fund complies.
As you already know, SMSFs are a paperwork-heavy beast. And as a result, much of the cost of an SMSF audit covers the time taken to review, line by line, the details of many documents:
- Trust Deed completed
- Member meeting minutes included in sufficient detail
- Adequate assessment of risks
- Appropriate insurance is in place
- Investment strategy in writing, reviewed regularly
- Does the investment strategy seem high risk, or is it reasonable?
- Have investments been made according to the agreed strategy?
- Has the investment strategy been proposed or reviewed by an independent financial advisor?
- Are all investments at arm’s length?
The tricky part is that an automated or AI-based audit probably won’t pick up on these issues. Only an experienced human auditor would pick up on non-arm’s-length transactions and raise them as a potential risk.
After the review of the SMSF paperwork, it’s up to the auditor to notify the accountant and trustees of any risks, breaches or contraventions. Ideally this would happen before submitting a report to the ATO, to give the trustees a chance to either fix the problem or make a voluntary disclosure. At the ATO’s discretion, they may choose to lessen the penalty if trustees make a voluntary disclosure of a breach.
The final step for the auditor is to report any breaches or contraventions that must be declared. Reports must be filed to ATO within 28 days of being discovered, on the ATO’s official forms.
You see, all this work is included in your audit fee. Most importantly, having an experienced auditor who knows how to handle delicate matters such as when and how to make a voluntary disclosure can end up saving trustees a lot of money in the long run.