Dear Auditors Institute,

I am auditing a fund for 5 years (2019 - 2023).

The fund purchased a commercial property in November 2016.

2018 Financial statements show $14,000 in rent received.

2018 Audit Report (unqualified) was provided but no Management Letter.

I noted that between 01/07/2018 & 30/06/2023, the property was not rented.

However, the 2022 valuation report showed that the commercial property was owner occupied and that the rental market is $31,540.

Here is the answer of the trustees after I queried them:

"I am not sure why the valuer in 2022 noted the property as owner occupied.  I had requested a valuation for the purposes of asset valuations for the Family Court and this was what was supplied.  I didn't discuss the property details with the valuer as it was ordered via their website.  

There has been no tenant or lease since 2018, so there isn't any lease agreements that were in place during the period since then.

We had had quite an issue finding tenants for the property, and other similar tenancies in the same complex had received damage by tenants that was costing in excess of the rentals returns to fix.  The body corporate was examining loading insurance premiums on those who had tenants leasing their properties, so a number of the owners decided to not make their properties available for rent, as the capital returns were strong and well outweighed the nominal rental returns that were carrying risk at that time.  We did actually advertise the property for rent during the 2019 and 2020 tax years, but only received interest from applicants that were outside of those industries allowed by the body corporate, or those that would have had insurance loadings applied due to the nature of their business.  As such it was decided to hold the property just for capital returns in the short term."

What would you do?

Can you please advise what you would request the trustees to confirm that the property was not rented to a related party?

Thank you very much in advance.