Session 12A: How to get the most from your Auditor

1. Session 12A:How to get the most from your Auditor Shirley SchaeferBDO

2. How to get the most from your Auditor • Auditor Relationships & Independence • Audit documentation • Auditor Contravention Reports • Rectification of Contraventions

3. Auditor Relationships & Independence • APES 110 “Code of Ethics for Professional Accountants” • Auditors to be independent from their clients • Independence of mind & in appearance • Identification of threats to independence “threat that the auditor may inappropriately issue an unqualified audit opinion”

4. Auditor Relationships & Independence • Not an adversorial role • Get to know your auditor • Their systems & procedures • Their documentation requirements (checklists) • How to resolve queries/conflicts • Use them as a technical resource

5. Auditor Relationships & Independence • Auditor communications • Engagement letters • Trustee representation letters • Reporting to trustees at the conclusion of the audit • Reporting to the ATO

6. Audit Documentation • AUASB “Australian Auditing Standards” • The auditor “shall” • ASA “Audit Documentation” • Evidence from third parties • Original vs copies • Physical vs electronic • prepare audit documentation that can be understood by an experienced auditor

7. Audit Documentation • Sufficient appropriate evidence to support the auditor’s conclusion • Bank Statements • Evidence of asset acquisition & valuation • Evidence of income & expenses • Contracts/leases • Private investments • Exotic/collectible assets • Contributions • Benefits & pensions

8. Audit Documentation • First year audit documentation • Trust deed • Member/trustee declarations, applications & nominations • ATO registration • Minutes of meeting • Investment Strategies • Prior year financial statements & audit report (signed) • Prior year auditor correspondence

9. Auditor Contravention Reports • Compulsory ATO Reporting • Does the fund meet the definition of a SMSF (s.17A)? • If No – compulsory reporting • Is the fund < 15 months old at year end? • If yes, compulsory reporting of ALL contraventions

10. Auditor Contravention Reports • Compulsory ATO Reporting • Has the trustee previously received advice of a contravention that they have breached again? • If yes – compulsory reporting • Is there an identified contravention from a previous year that has not been rectified at the time the audit is being conducted? • If yes – compulsory reporting

11. Auditor Contravention Reports • Compulsory ATO Reporting • Did the trustee fail to meet a statutory time period by more than 14 days? • s.35C(2) – provision of documents to auditors within 14 days of a written request • s.67 – borrowing for more than 7 days to settle securities transactions or 90 days for surcharge or benefit payments • s.82 – preparation of a written in-house-asset plan before the end of the next financial year

12. Auditor Contravention Reports • Compulsory ATO Reporting • Did the trustee fail to meet a statutory time period by more than 14 days? • s.104A – new trustees must sign a declaration within 21 days of appointment • s.126K – immediate notification to the ATO is required where a trustee becomes a disqualified person • reg 7.04 – contributions that must be returned to members required within 30 days

13. Auditor Contravention Reports • Compulsory ATO Reporting • Is the total value of contraventions (ALL) > 5% of the total value of the fund’s assets? • If yes – compulsory reporting • Is the total value of contraventions (ALL) > $30,000? • If yes – compulsory reporting

14. Rectification of Contraventions • Advise your client • Discuss a rectification plan • Have the client rectify the contravention ASAP

15. Rectification of Contraventions • Contact the auditor immediately • Provide evidence to prove the rectification • Bank statements • Signed agreements • In house asset plans • Correspondence

16. Rectification of Contraventions • Provision of financial assistance • Pay interest to the fund • In house assets • Preparation of an IHA Plan • Trustee forms/declarations not completed • Get declarations signed • Contravention may not be avoidable