Self-managed super funds are a huge investment that provides financial benefits to its members after retirement.
The trustees of the SMSF have to ensure the money they invest is being used in the most appropriate way to meet the fund’s financial goals and objectives.
An audit at the end of each financial year is crucial to the shareholders because they will be able to determine the accuracy of the financial statements.
Besides, SMSF trustees are legally expected to have their funds audited. Failure to do so can result in very high penalties.
The trustees are supposed to hire an independent SMSF auditor to do the audits and ensure they comply with the Australian Super Legislation.
Despite how tedious the auditing process may be, it is essential as it is the only thing that will give an accurate report about the status of the SMSF.
The trustees are therefore required to prepare the necessary documents in advance as the auditor will need them for auditing purposes.
Below is a checklist of the documents that need to be prepared.
Before any auditing procedure takes place, it is essential that you present a letter of engagement.
Through a letter of engagement, you are able to verify the appointment of the auditor for your business.
It also clearly states the scope of the audit and compliance, which ensures that both parties are on the same page.
Without clearly understanding the scope and extent of the audit, there might be some misunderstanding between the trustees and the auditor, and this is what you need to avoid.
The engagement letter is solely between the auditor and the trustee and should not involve any other third party, such as an accountant or administrator.
You should ensure that you also have a copy of the signed minutes.
Minutes are precious because they provide an official record of any decisions or actions taken by the trustee, in regards to the investment.
You should note that vague minutes can result in possible legal ramifications, hence, it is essential to take them seriously.
Besides, the auditor will be able to understand the SMSF better through the minutes because it gives detailed information about a wide variety of things.
The minutes should include things such as the adoption of any new investment strategies, member resignation, any amendments of the trust deed, contribution reserves, and approval of all financial statements.
As an auditor relies on these minutes, it should be easy for them and anyone else to understand how every decision is arrived at.
This is very crucial in the auditing process.
One of the requirements of an audit report is that the auditor should ensure they obtain sufficient and appropriate evidence on every assertion.
It is only through actual proof that they will be able to offer an authentic and unbiased opinion about the status of an SMSF.
One should, therefore, ensure that they can present the required evidence when called upon by the auditor.
This involves, among many things, valuation of property, presence of collectables, and any rights associated with them.
They should also ensure that all the information on the financial statement is justifiable.
Also, the accountant has to ascertain that the figures in the financial statements are appropriate.
The auditor is expected to assess any risks of material misstatement and perform substantive procedures on every class of transaction and account balance.
You should understand that auditing is a rigorous process which cannot be done without accuracy.
Therefore, you have to ensure that you fully support and participate in the process by offering the required documentation to the auditors.
Besides, they have to encourage their staff to cooperate with the auditor to ensure the process is smooth and done quickly.
Lack of participation of the trustees and accountants may delay the auditing process.
If you are looking to establish a Self Managed Super Fund, or need to have your Self Managed Super Fund audited, then look no further than SMSF Pro.
Please call us today on 1300 023 374 or message us through our website https://smsf-auditor.com.au/contact/ for all your Self Managed Super Fund requirements.