DIY super fund auditors will soon need to pass tougher standards in order to be approved to operate and it’s important you’re aware of this change so that you can make sure your annual audit remains compliant.
The Government recently announced the introduction of a new registration process for self managed super fund (SMSF) auditors as part of its Stronger Super reform package for Australia’s superannuation system. If an auditor fails to meet these requirements, any audit they complete for you won’t count.
What does this mean for your fund’s auditor?
The registration process will commence from 31 January 2013, with mandatory registration required by 1 July 2013 for all SMSF auditors wishing to continue SMSF audits after this date. Subject to transitional arrangements, registration will require auditors to meet the following criteria:
- hold a tertiary accounting qualification that includes an audit component or have successfully completed study in audit as part of a professional accounting body program;
- meet a fit and proper test;
- hold appropriate professional indemnity insurance;
- have 300 hours of SMSF audit experience in the three years prior to registration; and
- pass a competency exam.
Why are these new requirements important?
Given the level of taxation concessions provided to complying super funds and as auditors play a crucial role in the regulation of the SMSF sector, it is necessary that SMSF auditors have a high standard of competency.
The annual audit and the new registration process will provide assurance to the Government and the general public that SMSFs are complying with the super laws.
The new regulations will raise the standards of SMSF auditor competency and ensure that there is a set of minimum standards that apply across the entire sector.
Your role
As an SMSF trustee, it’s crucial to ensure your fund is audited annually by an approved auditor. You must appoint an approved auditor at least 30 days before the due date of the SMSF return. Upon appointment, you can expect a letter of engagement from the approved auditor, explaining the scope of the proposed audit.
The approved auditor is required each year to examine not only the fund’s financial statements but to also assess the fund’s overall compliance with super law. As an SMSF trustee, you have to ensure that you provide your fund’s approved auditor with any documents they require to conduct the audit.
An approved auditor will request a letter of representation from a fund’s trustee before they commence an audit of the fund. The letter is a statement from the trustees that SMSF trustees are of the belief that the financial statements are a fair representation and that the fund complies with super law. Your auditor will provide you with an audit report before the lodgement date of your fund’s annual return.
According to the Australian Taxation Office (ATO), a fund’s auditor is required to:
- provide the fund with an audit report before the due date of the SMSF annual return;
- bring to the ATO’s attention, and the attention of the fund’s trustees, to any concerns about the fund’s financial position or its compliance with the super law;
- report to the ATO any certain contraventions of the super law that they may identify during an audit.
If the fund’s auditor identifies a contravention of the super law, the trustees will need to take immediate steps to rectify the contravention.
Who can be an approved auditor?
Super law defines an approved auditor of an SMSF as any of the following:
- a member of CPA Australia Ltd
- a member of the Institute of Chartered Accountants in Australia
- a member of the National Institute of Accountants
- a member or fellow of the Association of Taxation and Management Accountants
- a fellow of the National Tax and Accountants and Accountants Association Ltd
- an SMSF specialist auditor of the SMSF Professionals’ Association of Australia Ltd
- a registered company auditor
- an auditor-general of the Commonwealth, a state or a territory.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.