.png)
The SMSF invested in crypto currency.
Coinspot statement is in the name of the SMSF.
Through coin spot the trustees transferred about 100,000 AUD to ‘Parker & Lawson’ as a term deposit.
Now there is no reply from Parker & Lawson, and the fund seems to be lost.
Total asset of the fund is $115,000. Out of which 100,000 AUD is lost.
Should I qualify the report on account of this major loss? Which section apply?
What else documents should I ask?
Hi Noble
I have not come across a term deposit being made via Coin Spot.
You will need to consider the financial & compliance part of the audit report. If the investment has been correctly written off or down I expect that you will not need to do a financial qualification but there may need to be a compliance qualification.
In relation to the any write off or down of the "term deposit" I would request documentation to support that the term deposit was actually made and documentation to support that the term deposit will not (or is unlikely to) be paid back. Further there should be documentation to support what action the trustees have taken to try & get back their investment. If there is no ability to get any proceeds re the term deposit a minute should be done to write off the term deposit / asset. If the investment was made in accordance with SIS then probably there is no SIS contravention even if it is written off / down. In terms of the compliance audit and whether there has been a breach of SIS and an auditor contravention report being required, I would consider the following sections / regulations of SIS: 1) Section 62 - sole purpose test. Does the investment meet the sole purpose requirements? 2) Section 109 - arm's length rules. Investments must be made on an arm's length / commercial basis.
3) Section 82 - 85 - in-house asset rules - was the loan / term deposit made to a related party? In relation to the above compliance concerns I would be requesting an explanation from the trustees as to: i) what due diligence was done in relation to the investment in the term deposit via Coin Spot? (this would be an audit issue re the year it was invested)
ii) does the Fund's investment strategy allow for such an investment to be made?(this would also be an audit issue re the year it was invested)
Once you have obtained an explanation to the above queries that may assist in whether you need to qualify the compliance audit (and lodge an audit contravention report). In relation to diversification you can qualify on this if the trustees have not considered diversification as part of their investment strategy.
The audit report states in relation to regulation 4.09 re the investment strategy that "the fund trustee has an investment strategy, that the trustee has given consideration to risk, return, liquidity, diversification, the insurance needs of fund members, and that the fund's investments are made in line with that investment strategy. No opinion is made on the investment strategy or its appropriateness to the fund members."
Thanks SMSF AAA