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In an audit I have come across, the smsf’s individual trustees acquired 2 real estate properties in 2007, however, in 2017, the trustee of this SMSF changed from two individuals to a corporate trustee and the individuals became directors of the new corporate trustee. They had not however changed the registered owner on the two properties with the Victorian titles office at the time and as we fast forward to 2022, these changes have still not been made (as they appear on the title searches performed recently)
So the trustee of the smsf and the owner on the real property assets do not match - Does this present a financial audit or compliance audit qualification issue from your perspective.
Hi Mark
Similar issues to your query have been raised previously & it is a common issue for auditors.
My view is that it is more of a compliance audit issue rather than a financial audit issue.
Re the property title issue Regulation 4.09A of SIS requires that:
"A trustee of a regulated superannuation fund that is a self managed superannuation fund must keep the money and other assets of the fund separate from any money and assets, respectively:
(a) that are held by the trustee personally; or
(b) that are money or assets, as the case may be, of a standard employer-sponsor, or an associate of a standard employer-sponsor, of the fund."
The ATO gives guidance on Regulation 4.09A of SIS & states at:
https://www.ato.gov.au/super/self-managed-super-funds/smsf-auditors/auditing-an-smsf/compliance-audit/
"The auditor should obtain evidence that the fund’s money and assets are held separately from money and assets held personally by the trustees or a standard employer-sponsor by:
· sighting asset ownership documents, including bank statements, to verify SMSF assets are held in the name of trustees on behalf of the fund (for example, R & J Smith as trustees for the Smith SMSF or R Smith Pty Ltd as trustee for the Smith SMSF) and not in the name of the trustees alone
· where State law prevents ownership in the SMSF’s name, checking for alternative documentation that protects the fund’s assets (for example, a valid declaration of trust)
· reviewing transactions on bank statements to ensure fund money is not mixed with money belonging to related parties of the SMSF.
Where there has been a change in trustees, the auditor should obtain evidence that ownership documents reflect the change."
My view is to not to qualify re Regulation 4.09A if you raise it in your management letter and the trustee agrees to rectify the asset ownership of both properties. If you are not satisfied with the response from the trustee you should qualify your audit report and report it in your audit contravention report (ACR).
It would be great to get other members view on this issue as it is a common issue faced by auditors.
Thanks
SMSF AAA