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Financial audit

SMSF auditors must conduct financial audits in accordance with the ASA and express an opinion on the financial report.

Last updated 11 August 2020

You must conduct your financial audit in accordance with the Australian Auditing Standards (ASAs)External Link issued by the Auditing and Assurance Standards Board (AUASB).

When undertaking the financial audit (Part A of the audit report) you should:

  • prepare and document the audit plan in writing, which details the approach to be undertaken
  • identify the nature, timing and extent of audit procedures used to address the risk that financial statements are materially misstated
  • gather appropriate evidence to support assertions for material account balances and transactions in signed financial statements (this includes evidence that assets are valued at market value and any non-arm's length income has been identified)
  • conduct testing of the assertions made in the signed financial reports about the    
    • existence of assets, entitlements and liabilities
    • occurrence of transactions
    • completeness of transactions, events and assets being recorded
    • ownership, rights and obligations the SMSF has for assets, entitlements and liabilities
    • accuracy and valuation of data amounts recorded
    • classification of relevant events to correct accounts
  • review the fund's tax calculation and allocation of any tax expense or benefit to the member's accounts including checking whether the fund has  
    • correctly classified income (for example, correctly report income as ordinary, statutory, exempt current pension income or arm's length/non-arm's length income)
    • incurred any deductions claimed
    • any imputation credits, carried forward losses and other offsets attributable to the fund
    • correctly classified the tax status of contributions
    • complied with regulatory laws that may otherwise impact their ability to claim concessional taxation treatment
  • document your conclusions, opinions and judgments based on the evidence obtained – there should be sufficient audit working papers to allow another auditor who has had no previous involvement with the audit to understand the work performed and the opinion reached
  • form an opinion about the fair presentation of the financial report based on evidence gathered and checks performed – your opinion should be reported in the approved Self-managed superannuation fund independent auditor's report (NAT 11466-07.2019) (IAR)form for the relevant reporting period.

Part A qualification for 2019–20 income year and onwards

Part B of the IAR gives the auditor’s opinion on the fund’s compliance with super laws while Part A of the IAR gives the auditor’s opinion on whether the fund’s financial statements are fairly presented (that is, there are no material misstatements). All Part B qualifications continue to be reported in the self-managed superannuation fund (SMSF) annual return (SAR).

For the 2018-19 income year, the SAR included the requirement to report a Part A qualification in the IAR and whether the reported issue had been rectified.

From 2019 -20 income year and onwards:

  • Part A qualifications continue to be reportable in the SAR.
  • The requirement to report whether a Part A qualification has been rectified or not has been removed from the SAR.
  • Where a Part A qualification results from insufficient audit evidence in relation to opening balances, there will be no requirement to report, as detailed in the SAR instructions.

Funds are selected for audit or review based on numerous risk factors including whether an Auditor contravention report (ACR) has been lodged for the fund. We would not generally select a fund for an audit or review based solely on a Part A qualification. If a fund with a Part A qualification was selected for an audit or review based on other risk factors, we would investigate the Part A qualification further.

Where SMSF trustees receive a qualified IAR, they should work to rectify any issues as soon as possible. The trustees can also make a voluntary disclosure to us. If an audit or review is commenced, the disclosure will be taken into account in determining any enforcement action and the appropriate level of remission of administrative penalties.

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