What to Send Your SMSF Auditor: A Checklist for Accounting Practices

Most delays in an SMSF audit have nothing to do with the fund. They happen because the file arrives incomplete, the auditor raises a query, the practice waits on the trustee, and a five-day turnaround becomes three weeks. The fix is on the preparation side. Here is what we ask for, why, and what trips files up most often.

The core documents for every fund

Every file needs the signed financial statements and member statements, the trustee representation letter, the current trust deed and all amendments, the fund's investment strategy, and bank statements for every account covering the full financial year. We also need the prior year's audit report and management letter if we didn't audit the fund last year, and the ATO annual return as prepared, so we can tie the figures back.

Of these, the trust deed is the one most often missing or out of date. A fund with a 2008 deed and no amendments cannot support most of what happens in a modern SMSF, and a deed problem found at audit time is harder to fix than one found during the year.

Supporting documents by asset type

The file for a cash-and-listed-shares fund is short: broker statements, holding statements or a registry report at 30 June, and dividend statements. Managed funds need the annual tax statement for each holding.

Property adds considerably more. We need the title search, the lease, the rental statements or ledger showing rent actually received, insurance for the property, the current valuation and the basis for it, and council and water rates. If the property is business real property leased to a related party, we also need the market rent evidence, because a related-party lease at a non-market rate is a contravention regardless of intent.

A limited recourse borrowing arrangement needs the loan agreement, the holding trust deed, confirmation of the holding trustee, loan statements, and evidence the asset is a single acquirable asset. Lenders change their paperwork, so the file should carry the actual executed documents, not a template.

Unlisted investments, private company shares and related-party unit trusts are where files most often come up short. We need the financial statements of the entity the fund has invested in, a valuation with evidence supporting it, and the fund's holding documentation. For an unlisted investment, a cost-base figure carried forward year after year is not a valuation.

Pensions and contributions

For each pension, we need the commencement documentation, the minimum pension calculation, and evidence the minimum was actually paid by 30 June. An underpaid minimum changes the fund's tax position and has to be reported. For contributions, we need to see they were received by the fund by 30 June, that they are within the caps (or that excess has been dealt with), and that any notice of intent to claim a deduction has been given and acknowledged.

Transactions during the year

Any in-specie transfer, asset purchase from or sale to a related party, or significant transaction needs its own documentation: the contract, the valuation at the transaction date, and trustee minutes approving it. The question we are answering is whether the fund dealt at arm's length and within the acquisition rules, and a bank entry alone does not answer it.

Where files most often fall short

Across the funds we see, the recurring gaps are the same: investment strategies that haven't been reviewed and don't mention insurance; valuations that are a number in the ledger rather than a document; minutes that are missing or unsigned; bank accounts opened mid-year that weren't included; and trustee representation letters signed by one trustee of two.

None of these is difficult to fix. All of them generate a query, and a query means the audit stops until the practice responds.

A note on queries

We send queries once, as a single consolidated list, to the person the practice has nominated. We don't contact the trustee unless the practice asks us to. The audit resumes as soon as the responses come back, and for most funds that means the signed report is still with you within a week of the complete file arriving.

The short version

If you want a fund audited quickly, send it complete. The checklist above is what "complete" means. If your practice would like a copy of our one-page engagement checklist to use on every fund before it leaves your office, call 1300 059 670 or request a quote and we'll send it with the engagement letter.

Superfund Auditors provides independent SMSF audits for accounting firms, financial planners and SMSF administrators across Australia. Registered auditors Kym Nitschke (SAN 100030760) and Melissa Burgess (SAN 100303786) are Chartered Accountants based in Adelaide.