THE AUDITORS INSTITUTE | FORUM

Archived Forums

When you become a member of The Auditors Institute, you immediately gain access to expertise, advocacy for your profession and peace of mind.

Ask a question in our members-only forum or use the search function to find prior technical discussions on your topic. You can expect a response within 24-48hrs.

Want to become a Member?

Join Now

Already a Member?

Disclaimer

The forum is made available by The Auditors Institute Ltd for the benefit of it’s members only, and its primary purpose is to facilitate education, training, and discussion between members. The information and answers provided within the forum are of a general nature and do not consider any specific circumstances, objectives, financial situation or needs related to the matter/s raised. The responses should not be construed as financial advice, and each Member should seek their own professional advice before making any decisions. The Auditors Institute Ltd and its representatives are not responsible for any actions taken based on the information provided in the forum.

To test this feature, visit your live site.

toby

Dec 19, 2022

Edited: Dec 19, 2022

Current Land Title Search

in SMSF Technical Forum

HI All,

Is a having current title search, on audit file, mandatory for every SMSF audit every year?

(not just best practice)

Toby

6 answers0 replies

Comments (6)

toby

Jan 18, 2023

Is anyone able to shed further light on this issue?

THE AUDITORS INSTITUTE

Jan 18, 2023

Replying to

Hi Toby

The ATO has guidance on their website re what an auditor should do.

It states at:

https://www.ato.gov.au/super/self-managed-super-funds/smsf-auditors/auditing-an-smsf/compliance-audit/

"Reg 13.14

The auditor should obtain evidence that trustees have not given a charge over or in relation to a fund asset by seeking written confirmation from trustees and by carrying out the following checks:

property title search to check for encumbrances on real property"

Thanks

SMSF AAA

THE AUDITORS INSTITUTE

Dec 20, 2022

Hi Toby

Doing a title search for each year is not mandatory in that the audit standards do not state that it has to be done yearly.

My view is auditors of SMSF's should do a title search each year for properties if they are material. Further my experience is that most SMSF auditors do a title search each year for properties if they are material.

Arguably you can only audit the existence of the property by doing a title search. Further you can only check that there is not a security (assuming no LRBA) or charge over a property unless you do a title search.

It would be great to get other forum members views on this question.

Thanks

SMSF AAA

toby

Dec 31, 2022

Replying to

Thanks

I agree that a yearly title search is not mandatory, following from that... is it mandatory to record in your work papers your reason for not doing one?

Toby

THE AUDITORS INSTITUTE

Jan 01, 2023

Replying to

Hi Toby

It is not mandatory to record in your workpapers why a title search has not been done but again it would be best practice to do so.

As I noted my view is auditors of SMSF's should do a title search each year for properties if they are material.

Thanks

SMSF AAA

toby

Jan 09, 2023

Replying to

HI,

Thanks, but I think your reply is incorrect.

I can confirm, that in my experience, the ATO consider it is mandatory to do a land title search on every audit or alternatively record your detailed reasons for not doing one in your file.

Failing to do this results in a referral of your registration to ASIC as a major reportable breach of the auditing standards. (Even if you have every other possible document, including LBRA docs, signed rep letter, bank statements, council rates, rental statements, professional commercial valuation, copies of the bare trust deeds etc). (Even if no other issues identified in the audit file)

In my opinion, The ATO position is not sensible or fair. Their reasoning relates to having sufficient evidence to confirm there are no non-permitted charges against the asset. (NOT related to confirming an asset is held correctly).

However, as we all know, a title search is only a snapshot of the title at the time of the search. It will not show charges that have expired or been removed. (I know VIC will show 145 days) As such, a clear title search is NOT evidence of NO charge being given over the audit period.

It will also obviously not reveal if an unregistered charge has been given as their is no legal requirement to register a charge to make it legal. (A lender would be nuts not to but they don't have to)

Toby