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I am auditing a 2023 fund which holds a commercial property valued at $1.5m supported by a qualified valuer report dated May 2022.
It is a single member fund on full pension mode. The commercial property equates to 86% of the gross asset with the balance in listed shares. Fund has no borrowings.
The Fund's accountant is a related person to the member. The trustee used the valuation of $1.5m in its 2021 and 2022 financials and uses the same valuation report for its 2023 financials.
The valuation report has been relied on for 2 years prior and it is 14 months old. Based on these facts, do I hold enough grounds to accept this valuation as sufficient audit evidence? Bearing in mind that it is not the auditors' role to question the appropriatenss or accuracy of the valuation adopted by the trustee.
If I do not accept this valuation, can I simply mention the issue in the management report, giving time for rectification in subsequent year. As an auditor and not having the market value as at 30 June 2023, I cannot form an opinion as to whether the issue reaches the ACR reportable financial threshold. Therefore the audit is not qualified and no ACR required.
Your opinion would be appreciated.
Under Regulation 8.02B of Superannuation Industry (Supervision) Regulations 1994, it is a requirement that trustee(s) of a superannuation fund, including a Self-Managed Superannuation Fund, values assets at their market value when preparing accounts and statements.
This should not be conflated with an assumption that there is a requirement to obtain an independent valuation of real estate every 30 June. Likewise, there is no assumption or rule of thumb, that an independent valuation has some automatic lifespan during which it can always be relied upon (for example, three years).
So where does that leave the SMSF auditor where a trustee is wanting to rely upon the same valuation for real estate for a third year in a row?
The role of the auditor is to test the basis on which the assets of the fund have been valued. The auditor is not expected the determine the value of the asset themselves.
Perhaps the auditor could request that the trustees of the fund provide a declaration affirming that they have considered the appropriateness of the valuation obtained for the 2021 income year as applied to the 2023 income year, and in the view of the trustees it is still considered to be an appropriate and accurate valuation.
Whilst acknowledging (as discussed above) that an independent valuation of real estate has no assumed lifespan where it can be relied upon without question, it would be reasonable to convey to the trustees in a management report, that it is advisable to obtain a new valuation in relation to the real estate for the 2024 income year.