SMSF Auditing, Auditors and the Online Audit Process

Self-managed super funds or SMSFs must be audited each year by an auditor independent of the tax accountant and fund administrator preparing the financial statements. An online SMSF audit refers to an audit process that involves submitting information and interacting with the SMSF audit provider online instead of conventional face to face processes. An online SMSF audit is said to be more cost-effective and efficient in some ways and typically would attract a lower fee. This Q&A will cover how an SMSF audit works, what options are available, the costs, and what information you will have to provide to the auditor.

What is an SMSF audit?

There are a number of ongoing compliance responsibilities that come with operating an SMSF, including the annual tax return and financial audit process. An SMSF auditor will examine the authenticity of the fund’s financial records and ensure the fund is compliant with SMSF laws.

An online SMSF audit consists of two parts: a financial audit and a compliance audit. The financial audit focuses on the SMSF’s financial statements to ensure compliance with Australian Auditing Standards, and the compliance audit confirms that superannuation legislation has been adhered to. An online SMSF audit must be completed by a registered and approved SMSF auditor that has been engaged by the SMSF trustees.

Is there a difference between online SMSF audits and offline audits?

The main difference between online SMSF audits and regular audits is largely centered around the way information and data are collected. There can be differences in how the auditor engages with the trustee(s), either through an online portal and audit software or conventional methods. Some online SMSF audit services will integrate with investment platforms directly and leverage efficiencies in data sharing with the integration of software services. In terms of online audits and offline audits, the costs or fees can be more or less the same, and it ultimately comes down to the following determining costs of the audit report:

• Types and complexity of the investments
• Record keeping of the fund and SMSF compliance
• The accounting system used to reconcile transactions

What is an SMSF auditor?

An SMSF auditor must be registered and authorised by the Australian Securities and Investment Commission (ASIC). Their job is the ensure the financial dealings of the fund comply with superannuation laws. According to the Australian Taxation Office (ATO), an SMSF audit is required even if there is no activity or payments within the year.

The SMSF auditor will provide you with a letter of engagement that outlines what they will be going through during the SMSF audit. They will also provide valuable insights on how the fund is performing, and if they request any information relevant to the fund, you must provide it within 14 days. Having an experienced and independent professional specialist is the best way to ensure all calculations and figures are correct, which may negatively impact the SMSF.

Who can audit an SMSF?

SMSF auditors must be approved by ASIC and be compliant with the ASIC competency standards, specifically the ASIC Class Order 12/1687 Competency standards for SMSF approved auditors. The competency standards align closely with the requirements for SMSF auditors that are issued by accounting bodies.

Competency requirements for SMSF auditors are mandatory for members of professional accounting bodies who wish to complete this type of work. Public service providers who are conducting SMSF audits must meet the following standards:

• Hold a professional accounting body practising certificate of which they are a current member.
• Ensure professional indemnity insurance cover is held continuously.
• Complete continuous professional development training, made up of at least 30 hours in a rolling three year period (8 hours of superannuation, 8 hours of financial and compliance audit training and 4 hours of financial accounting training).
• Ensure that anyone undertaking work on their behalf has adequate experience and knowledge and are supervised during the SMSF audit.

How much does a self-managed super fund audit cost?

SMSF audits can vary in price, and unfortunately, there are no set guidelines on what auditors can charge for completing an SMSF audit. Data collected from the ATO shows that an SMSF audit costs around $690 on average over the 2019/2020 financial year.

The SMSF audit fee statistics listed below were released by the ATO in February 2021, taken from data between 30 June 2015 and 30 June 2019.

SMSF Audit fee range				2014–2015	2015–2016	2016–2017	2017–2018	2018–2019
$0 to $499				36.5%	36.9%	37.6%	38.4%	37.9%
$500 to $999	47.8%		48.9%	49.7%	50.2%	50.4%	49.7%	50.2%
$1,000 to $1,999	12.0%		11.5%	11.0%	10.5%	9.8%	9.8%	9.9%
$2,000 and above	3.4%		3.1%	2.8%	2.4%	2.1%	2.1%	1.9%

How often are SMSF audits required?

According to the ATO, an SMSF audit is required each year prior to lodging your annual return, and they stipulate that you must appoint an SMSF auditor 45 days before the return is due to be lodged. Failure to lodge your return on time may incur financial penalties. A separate reason that your SMSF audit has to be finalised prior to lodging your return is that you will need some information from the SMSF audit to complete the return correctly. It is also a requirement to list the SMSF auditor’s details in the return.

Why is it essential to use an ASIC registered SMSF auditor?

SMSF auditors need to be registered with ASIC due to their important responsibilities. They are to ensure that your SMSF complies with superannuation legislation and verify the accuracy of the SMSF’s accounting records. An SMSF auditor not only supports trustees with the management of their retirement savings; they also assist in the overall health of the SMSF industry.

Chartered Accountants ANZ and other professional accounting organisations set out criteria which SMSF auditors have to meet, alongside ASIC’s eligibility criteria. The standards required are listed below:

• Complete all initial training requirements, including a course that focuses on the auditing process of SMSFs and complies with regulations set out by your professional accounting body.
• Hold a current practising certificate issued by the professional accounting body that you hold a membership with (CA, CPA, NIA).
• Complete 120 hours of continuing professional development (CPD) training in a three-year period. This must include 30 hours focusing on superannuation and 8 hours auditing SMSFs.
• Ensure all approved SMSF auditors involved in the audit have the required knowledge, experience, training and adequate supervision.
• Have adequate Professional Indemnity insurance.

What else should I know?

Before undertaking an online SMSF audit, you will have to provide the auditor with all financial information relating to the SMSF in the previous financial year, including bank statements and transaction data. You will also need to give the auditor a trustee representation letter confirming that the financial statements are correct and comply with relevant superannuation laws—any information required by the online SMSF auditor within 14 days, according to the Australian Tax Office. Once the SMSF audit is completed, the SMSF auditor will provide you with an independent report. If there are any issues, they will work with you for the best course of action. Any breaches must be reported to the ATO by your auditor, even if they have been resolved. Maintaining transparency during the online SMSF audit is best to ensure the fund remains compliant and eligible for any tax concessions.

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