I have been the auditor for a fund since FY2018.  The fund has on going loans to members and related parties, year after year, and multiple ACRs were lodged over the periods.

Questions are now raised as to the true identities of the receiving parties of those loans.  The concerns I have:

If the benefits of those loans went to the members’ or their relatives (possible that the loans were re-directed to the non member spouse), then the withdrawals should be taken as “early access”, and in that case, the subsequently repayment could arguably be “contributions”?  Is this the correct path?

From the audit point, is it reasonable for the auditors to ask for copies of relevant bank statements for the receipts of those transfers so as to confirm the identities and to line up with the loan agreements?

I have been given a balance sheet of a family trust who received one parcel of loans from the SMSF.  The balance sheet of the family trust shows a substantial negative current ratio (over $1m), with a quick ratio of negative $0.  This is because the family trust has no cash at bank or on hand, with $1m worth of unsecured asset loans at call, and correspondingly with more than $1m worth of current liabilities.  The SMSF I am auditing forms part of the current liabilities.  Incidentally, the $value of this loan by the SMSF to the related family trust is 99% of the SMSF’s gross asset.  As auditors, I form the opinion that the recoverably of the loan by the SMSF to the family trust is doubtful and warrants a write down.  Then the question of going concern of the SMSF is a real issue.  The member’s benefit payment will not be met and there will be no monies to pay the tax debt.

In the above case, what are the contraventions, apart from the usual IHA and section 130 reporting?