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Auditing For Self-Managed Super Podcast

Auditing For SMSFs Podcast Transcript

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Tim: Welcome back to SMSF Mate Podcast. In this episode we’re talking about SMSF audits, the audit process, how it works, online audits, things like that. My name’s Tim and I am here with…

Sonny: Sonny.

Ashwin: And Ashwin. I think I’ll start with the question I suppose. With the audit process one of the requirements for your self-managed super fund is for it to be audited each year. Now you might get recommendations from your accountant but first and foremost you’re the trustee. You control and decide who the auditor is. I would probably look at the ASIC website where a list of auditors are registered and you can find a whole bunch to make sure they’re registered. We’ll check on the account and make sure they’re part of the tax practitioners’ board. After that it’s really just reaching out to find out what their process in their fund is and what they require. You can do the same things that you’ve asked your accountant. What sort of software, what sort of processes do they go through to maintain that it’s compliant but also that they’re reducing your cost but also they’re doing a good job. It’s not just a tick and flick. There’s actually some involvement of doing a proper audit process because that’s what you’re maybe that they’re there to give you a bit of peace of mind that you haven’t misstepped anywhere but they’re also giving you feedback.

That’s probably the most common thing I don’t see clients really doing is you probably reach out to the auditor for maybe things to do better. They will obviously list any contraventions and things you’ve done because they will do that in the order report but you can always reach out and ask for more. Most times the accountant is going to tell you steps to do things better from a record-keeping point of view but the audit is there. We do have clients during the year that might be looking to do something and we’re not sure as an accountant. We would advise them to call the auditor to go through with the order what things do I need to make sure that this is okay to do. Those all things you can use as a second resource effectively. Those are things you want to check that the order is willing to engage you for work throughout the year potentially if you need to ask them on top of the normal audit of your fund.

Sonny: I think that’s probably the key difference when you mention online versus otherwise not some physical. Online, I think could be fine so long as you’ve got an opportunity to engage. You want to have that opportunity in case you think or feel like you’re about to step over a line or you need to clarify something or your accountant should check it. I think from my point simplicity is do some due diligence around the auditor itself. It might not just be what your accountant recommends but if you get to engage a conversation with them do so, do your due diligence, do your research on them, get a feel whether they’re keeping up to date with standards and requirements. Like all service providers, all auditors aren’t created equal. I think it’s a careful selection process at the same time.

Ashwin: Exactly. Very clear that you should have that conversation that is another person especially if you don’t have an SMSF specialist like we’ve mentioned in the previous podcast. An auditor is your second person to speak to.

Tim: All right. An auditor is essentially like the goalkeeper, would you say just to make sure everything’s going as it should.

Sonny: Goalkeeper, referee.

Ashwin: I think that one misconception out there is an auditor is going to check everything. Auditors don’t check every transaction and everything. They do a review effectively. It’s an engagement but it’s not a catch-all everything. It’s not like oh maybe AFL umpire is probably not the best example but an AFL umpire is watching the whole game so they’re watching everything to try and catch it. An auditor is not going to go through every line-by-line transaction. They’re going to do it well, from my memory a long time ago. This is going back to uni. They do an audit plan. They do a risk assessment and they’ll go through and assess…

Sonny: Sample size.

Ashwin: Sample size and they’ll pick a couple and go through and check. They’re not going to do everything but it’s still peace of mind that it’s an independent party doing another review to make sure things look okay.

Sonny: Like a referee on a football pitch they’re not going to see everything right?

Ashwin: You hope they did.

Sonny: They’re going to focus in on where the ball is at. I think if it’s not a goalkeeper you might think of it as a backstop maybe in baseball because at the end of the day the trustee has the ultimate obligation and responsibility. It is still self-disclosure. The auditor’s there, I think I’ve seen some trustees in the past think of auditors in a particular way. At the end of the day the audit is there to help them right? Help them to stay within the framework that they’re supposed to, within the rulebook for their own benefit and at their own risk. I think coming again to that selection of auditors that you can work with really important but remember that they’re actually there to help you keep the train on the tracks.

Tim: I guess what is the typical cost of an audit? I know we’ve covered this off in a previous podcast but what would you expect to pay and what are the factors there?

Sonny: Maybe before you start talking about numbers Ashwin an easy answer again is it comes down to complexity. It depends on what you’re auditing, how many transactions, the detail of the structure and the makeup and the investments, listed, unlisted property. There’s a whole lot of I guess detail in that that determines the overall cost which is really then complexity and transaction based but again maybe from a baseline point of view Ashwin starting…

Ashwin: I think we’re starting probably for 400, 450 to 1200, 2000 depending on all the stuff in there. We come back exactly. We come back to it. If you’ve got a fund that’s in full pension phase which is bank accounts and some ASX shares complexity is not the same as a fund with a whole bunch of unlisted artworks and overseas bullion and stuff like that. It’s a very different…

Tim: Is there a ceiling for audit costs or it’s just whatever?

Ashwin: They’ll give obviously a proposal and a scope based on what the fund has done during the year but no, there is no agreement just like there’s no agreement on the accounting fees or the investment fees. You’re the self-managed person who’s engaged these people. You’ve gone through a process of you’ve made the selection. If you’re not comfortable with that you can always go back and try and find another auditor if you’re not happy with that price. You can find someone else but be wary of maybe the guy’s charging that because he’s very thorough in checking the risk that are a part of your fund.

Sonny: There’s some on costs as well. It’s not just the auditor cost. In the case of unlisted investments or property and the like there might be valuation costs on top because there needs to be a mark to market.

Ashwin: Valuations depending on what this act requires but those are things that an auditor will point out if the accountants aren’t aware of it as well.

Tim: One last thing. Who can audit an SMSF and why is it essential to use an ASIC registered SMSF auditor?

Ashwin: Well that’s the only place where they are registered. That’s the only guidance that your auditor has gone through the steps to become. It’s a qualification check. ASIC can then check it. That’s the guide. That’s your source of making sure they’re registered. Second part of the question was?

Tim: Who can audit one? Like is an auditor an accountant or are they some someone that’s done civic training?

Ashwin: They are typically an accountant by trade but then they’ve done the auditing requirements to become an ASIC registered SMSF auditor. They’ve gone one step further do a qualification to sign off on those things.

Sonny: Yes, a registered professional in the space. Again, if you think about the greatest risk of a self-managed superfund or superannuation and getting that wrong not having the right audit or auditor. Complying status is probably the biggest risk.

Tim: Right. Short and sharp.

Thank you for joining us once again. If you’re interested in our waffle about self-managed super funds feel free to join us on smsfmate.com.au or search SMSF Mate in Spotify.

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    Tim B, Business Owner, SMSF Trustee