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Hello,
Im Auditing an SMSF which has acquired in a prior year, an apartment in a sizeable city in the Philippines. To direct focus on the actual issue, lets say that the that the Apartment was acquired on an arms length basis, and is not leased to a related party. I understand that the Auditing standards along with SIS compliance standards require evidence to support ownership, rights, valuation (or others as applicable) - Therefore in evidencing ownership - would you be able to offer suggestions to evidence ownership? I have been provided with the original title deed issued from the nearest Phillippines City Titles Registry - the problem here is that it is old (i.e from 2013 approx.), and I cannot get sufficient current title search evidence showing that the property is currently held (as at 30 june 2021). Would it be appropriate to qualify my audit opinion based on R8.02B? or R4.09A? or is it more appropriate to rely on some other piece of audit evidence - what would you do? (I should also add that valuation evidence is a recent letter from a local Phillippino estate agent who has estimated a current value for the property) Would I be safe in applying your response to to the above to other geographical real property markets that SMSF have invested in?
Hi Mark
Auditing foreign property held by a SMSF can be difficult. I also understand that obtaining a title search in the Philippines can be very difficult.
As a starting point my view is that you would issue a Part A financial qualification that you have not been able to verify the existence of the property. The tax agent would disclose the qualification in the annual return.
In relation to the compliance audit you refer to:
Reg 8.02B - an asset must be valued at its market value.
Reg 4.09A - assets of the SMSF must be held separately from any assets held by the trustee personally.
You could also argue that if you cannot get a current title search you cannot verify if there is a charge over the asset (Reg 13.14).
I have not had experience in auditing foreign property so it would be great to get member's views as to how they would approach the audit.
My view is I would also issue a compliance qualification if you are not able to get satisfactory evidence to support its existence, its valuation & whether there is a charge over the asset and refer to the regulations noted above.
Thanks
SMSF AAA