All SMSF (Self Managed Super Fund) trustees or directors must appoint an approved SMSF auditor to audit their fund every year. Not only is an annual audit mandatory but it must be conducted by an approved SMSF auditor who is registered with the Australian Securities and Investments Commission (ASIC).
But who is an approved SMSF auditor and what do you need to consider when appointing one for your SMSF?
Who is an Approved SMSF Auditor?
An SMSF auditor is responsible for analysing your fund’s financial statements and makes sure that your fund is compliant with superannuation law. They must report any non-compliance issues to all fund trustees and the ATO.
To qualify as an approved SMSF auditor, a person must demonstrate:
- they hold the necessary academic qualifications, such as a degree (minimum three years) in accounting which included a course in auditing
- they have at least 300 hours experience auditing SMSFs in the previous three years under the direction of an approved SMSF auditor
- they have passed a competency exam, and
- ASIC is satisfied that they:
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- are unlikely to contravene the ongoing obligations of an approved SMSF auditor
- are capable of performing the duties of an approved SMSF auditor
- are a fit and proper person to be an approved SMSF auditor
- hold adequate and appropriate professional indemnity insurance
- are an Australian resident
- are not subject to an enforceable disqualification or suspension order.
To maintain their approved SMSF auditor status, auditors must satisfy continuing professional development requirements, maintain adequate and appropriate levels of professional indemnity insurance and report to ASIC annually.
Appointing an Approved SMSF Auditor
As an SMSF trustee, you must appoint your SMSF auditor no later than 45 days before your SMSF annual return (SAR) is due to be lodged.
Your SMSF auditor must be:
- registered with ASIC’s “Search SMSF Auditor register” which can be found on ASIC’s website. This register will show the SMSF auditor’s number which you need to provide on your SAR, and
- independent – they should not audit a fund in which they hold any financial interest, or where they have a close personal or business relationship with members or trustees.
Before an SMSF auditor can start an audit, you or your adviser must provide the auditor with all relevant documentation about your accounts and transactions for the previous financial year so they can conduct and finalise the audit. If your SMSF auditor requests more information from you, it must provided to the SMSF auditor within 14 days of the SMSF auditor’s written request.
Tip – an audit is still required even if no contributions or payments are made in the financial year.
SMSF Audit to be Finalised Before the SAR is Lodged
Your SMSF audit must be finalised before you lodge your SAR, as you’ll need some information from the audit report to complete the SAR. You must also ensure that your auditor’s details are provided in the SAR, otherwise you may be penalised.
Your auditor should advise you of any breaches of the superannuation rules. As trustee, you should rectify any contravention as soon as possible.
Your auditor is also required to report certain contraventions to the ATO. Even if you terminated an auditor engagement or the auditor does not finish the audit, if they have identified a reportable contravention, they are obliged to report the contravention to the ATO.
Appoint an SMSF Auditor Early
Approved SMSF auditors have a critical role in helping to maintain the integrity of the SMSF sector through the annual audit of each SMSF. Make sure you appoint an approved SMSF auditor early to ensure the audit can be performed in sufficient time for the SAR to be lodged on time otherwise you could face severe financial penalties if you don’t appoint an auditor by the due date.
If you have any questions about SMSF’s contact your Stratogen accountant.