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  • Report SMSF contraventions even if an audit engagement is terminated

    If an approved self-managed super fund (SMSF) auditor forms the view that a contravention of the Superannuation Industry (Supervision) Act 1993 (SISA) and/or the accompanying regulations has occurred, may be occurring or may occur, during the course of conducting an audit, section 129 of the SISA requires the auditor to:

    • notify the fund trustees in writing
    • report the contravention to us via an Auditor/actuary contravention report (ACR), provided the reporting criteria is met.

    Auditors are reminded these reporting obligations exist from the time the auditor is appointed by the SMSF trustees to undertake the annual audit of the fund’s operations, and do not cease simply because an audit engagement is terminated early. This applies whether the engagement is terminated by the trustees or the auditor.

    Provided the opinion is formed during the course of, or in connection with, the SMSF approved auditor performing their audit functions, section 129 of the SISA will apply.

    This means if an auditor is appointed to audit an SMSF, and they identify a contravention in the course of undertaking that audit, but their engagement is terminated before they finalise the audit (and give the trustees a report on the fund’s operations), the reporting obligation still exists.

    If an auditor finds themselves in this situation, they still need to consider lodging an ACR as follows:

    • If a contravention meets the reporting criteria – the auditor must report it at the ‘Contraventions’ section (Section E) of the ACR.
    • If a contravention does not meet the reporting criteria – the auditor can still tell us about the situation by completing the ‘Other Regulatory information’ section (Section G) of the ACR.

    While not mandatory, the ‘Other Regulatory information’ in Section G of the ACR, gives auditors the opportunity to notify us of any additional concerns they have about the fund or trustees they believe will help us in performing our functions as the regulator of SMSFs.

    These concerns might include where a client has terminated an audit engagement because a contravention was identified. We encourage auditors to report this type of conduct to us at Section G so we can consider whether any compliance action needs to be taken against the fund.

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      Last modified: 13 Nov 2020QC 64177