1. Communication with trustees Critical considerations for SMSF auditors

2. Communication with SMSF trustees Disclaimer Please note this presentation is to be considered as general advice only. The opinions of the presenter should not be relied upon as providing specific advice for you or your clients. The information contained within this presentation is based upon our understanding of the relevant legislation, regulations and other materials as at July 2014.

3. Communication with SMSF trustees Topics Covered 1.What are the auditor’s communication requirements 2.Situations requiring communication 3.Implications for lack of communication 4.With whom shall the auditor communicate

4. 1. What are the auditor’s communication requirements

5. Communication with SMSF trustees 1. What are the auditor’s communication requirements Whilst the auditor is required to form an opinion on whether: (a)The financial report is free from material misstatement; and (b)The trustees have complied, in all material respects, with the specified requirements of the SISA and SISR. Do the auditor’s communication responsibilities extend beyond this?

6. Communication with SMSF trustees 1. What are the auditor’s communication requirements The auditor’s communication responsibilities also include: (a)Significant qualitative issues identified during the audit; (b)Significant deficiencies in internal control; and (c)Other matters of importance not presented in the financial report. Refer page 4 of notes What issues may fall under each of the above?

7. 2. Situations requiring communication

8. Communication with SMSF trustees 2. Situations requiring communication Refer examples on pages 5 to 10 of notes for issues that may require the auditor to communicate issues or concerns with the trustees:  Example 1 – Trustee(s) history of paying non-fund expenses (p.5)  Example 2 – Non Lapsing BDBN (p.6)  Example 3 – Breach of trust deed requirements (p.7)  Example 4 – Private unit trust investments (p.8)  Example 5 – Investment strategy concerns (p.9)  Example 6 – Individual trustee vs corporate trustee (p.10)

9. Communication with SMSF trustees 2. Situations requiring communication As an auditor, ask yourself this question If you identify any concerns relating to the SMSF, whether or not the concern results in a contravention or otherwise, and there exists the potential for adverse consequences for the trustees / members, do you believe the trustees / members would like to know about the concerns? If ‘Yes’ – Include in the management letter! Why? If not for the fact you are looking after the interests of the trustees / members - Australian auditing standards require you to!

10. Communication with SMSF trustees 2. Situations requiring communication Additional matters of concern In addition to the 6 examples discussed, what other situations do you believe, if identified, may require reporting to the trustees / members?

11. Communication with SMSF trustees 2. Situations requiring communication When determining whether to communicate a matter, consider the: (a)Intended users; (b)Frequency of the occurrence; (c)Materiality of the issue; and (d)The implications for not communicating.

12. 3. Implications for lack of communication

13. Communication with SMSF trustees 3. Implications for lack of communication Consider 1.Shail Superannuation Fund v Commissioner of Taxation [2011] 2.Triway Superannuation Fund v Commissioner of Taxation [2012] 3.Tax and Superannuation Laws Amendment (2014 Measures No.1) Bill 2014, 2014 Refer pages 11 - 15 of notes

14. Communication with SMSF trustees 3. Implications for lack of communication For the 2 minutes required to include in a management letter you could potentially save yourself from....

15. 4. With whom shall the auditor communicate

16. Communication with SMSF trustees 4. With whom shall the auditor communicate How many of you (a)Communicate only with the fund’s accountant? (b)Communicate only with one of the fund’s trustees? Consider Q.What are the potential consequences of failing to communicate with all trustees? Q. Is the auditor required to communicate with all trustees?

17. Communication with SMSF trustees 4. With whom shall the auditor communicate Australian auditing standard requirements ASA 260 – Communication with those charged with governance  The auditor shall determine the appropriate person(s) within the entity’s governance structure with whom to communicate  The auditor shall communicate with those charged with governance significant matters arising from the audit. How do you ensure all trustees receive your communication?

18. Conclusion – When in doubt tell the trustees 4. SMSF investments in overseas properties

19. Thank you