ATO position on auditor evidence obligations remain unchanged

SMSF Association Media Release

The SMSF Association says the ATO’s position in relation to what is expected of auditors when checking whether or not there are any charges over an SMSF’s assets has not changed.

Despite recent speculation that the ATO had changed its position on this issue, SMSF Association Head of Policy and Advocacy, Tracey Scotchbrook, says this is not the case.

“We have confirmed with the ATO that the Commissioner has not made any changes to its view which aligns with an SMSF auditor’s obligations as set by the Auditing and Assurance Standards Board. The ATO’s recent statements in ‘Checking for charges over property assets’ (QC 73156) does not restrict an auditor applying their professional judgement or providing alternative evidence.”

She adds, however, that testing a trustee’s compliance with SIS Reg 13.14 is, by its nature, “fairly limited” and most commonly satisfied by a title search.

She says the ATO’s position has been consistent for some time, with the ATO’s compliance audit guidance on SIS Reg 13.14 stating:

The auditor should obtain evidence that trustees have not given a charge over or in relation to a fund asset by seeking written confirmation from trustees and by carrying out the following checks:

  • Property title search to check for encumbrances on real property.
  • The Personal Property Securities Register for other parties registering interests against other SMSF assets.

Scotchbrook adds: “As the number of auditor referrals to ASIC continues to rise, it’s increasingly obvious that there is a misalignment between the ATO’s expectations and the practices of some in the industry, and it is something we as a sector need to work on to bridge the gap.

“In our opinion this will be greatly assisted by the ATO’s decision to release a series of articles to provide clarity to auditors.

“Importantly, we expect future ATO articles to focus on specific compliance issues ATO officers have identified when reviewing SMSF auditors.

“It also reinforces the fact that a cursory review of an SMSF won’t meet the ATO’s expectations if the auditor is subject to a compliance review.

“This is not to say most auditors are not doing the right thing. But it is to highlight that if auditors want to prevent a referral to ASIC, they need to demonstrate that they follow a rigorous process that clearly documents and adequately supports their opinion.”

SMSF professionals are continually confronted with these complex arrangements, with the upcoming virtual offering of the SMSF Association’s SMSF Audit Day on 20 September 2023.

The one-day program will delve into the importance of SMSF trustees and auditors collecting and retaining appropriate evidence.

Register here for SMSF Audit Day.