The ATO has released further detail around the results of its investigation project into the top 100 auditors in the SMSF sector, revealing that loan documentation and valuations of more unusual fund assets were some of the key compliance aspects tripping auditors up.
The regulator had audited 51 of the top 100 auditors in the sector at the end of the 2019 financial year, 36 of which the ATO said required further education.
Twenty-three of the 36 auditors had failed to obtain sufficient appropriate evidence to verify compliance with super laws among the funds they audited, the ATO said.
Particular areas of concern among this group were failing to obtain objective and supportable data in the valuation of unlisted assets, failing to obtain the loan agreement or bare trust deed for an LRBA and not obtaining sufficient valuation evidence for collectibles held within an SMSF.
Evaluations of evidence were also lacking on some audit files with respect to whether loan or lease agreements were between related parties and whether the terms were arms length.
The ATO also noted that seven auditors did not have signed financial statements in their files, four auditors had failed to retain a signed engagement letter in some of their files, and a further four had failed to identify that an SMSF’s assets were not in the correct name.
Two auditors had also been referred to ASIC in the course of the ATO’s investigation, while three had voluntarily deregistered when the regulator commenced its audit.
“ASIC has since imposed conditions on the registrations of one of the auditors under section 128D and we’re awaiting an outcome of the referral with respect to the other auditor,” the ATO said.
The 36 auditors who had received an education outcome would continue to be monitored and would be referred to ASIC if they had not improved their processes by their next ATO audit, which would occur in the next two to three years.
The ATO said it’s hoping to audit the remaining 49 auditors in the top 100 group by the end of the 2020 financial year.
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