.png)
I am auditing a fund where the trustees cannot locate a copy of the original loan contract/agreement.
Therefore, I cannot confirm whether there is limited recourse available to the lenders, which we are required to check per ATO's Compliance Audit minimum evidence guidance.
If I cannot obtain sufficient evidence of LRBA terms, does this warrant a qualification of the audit report - Part B? If not, what is the most appropriate course of action?
Thank you.
Hi Jason
Yes agreed that as the auditor you would need to request a copy of the loan agreement to see if this will meet the requirements of SIS (refer SIS section 67A). The auditor needs to be able to review that the rights of the lender:
"are limited to rights relating to the acquirable asset".
As you refer to the ATO guidelies are at:
They require the auditor to check re an LRBA:
"loan documents to ensure there is limited recourse available to the lender should the fund default on the borrowing" & also:
"express terms of any guarantee arrangements limit the rights of the guarantor to rights relating to the asset which is the subject of the arrangement".
Yes if the loan agreement cannot be obtained technically the auditor should qualify their audit report re SIS section 67A.
A common approach by auditors is to get the trustees to write to the lender and request confirmation that the loan is on a limited recourse basis when the loan agreement cannot be located. (refer example letter to lender below)
If other forum members have a view please let the forum know.
Thanks
THE AUDITORS INSTITUTE
EXAMPLE LETTER
SMSF Lender
Level 1 Smith Street
NEWCASTLE NSW 2300
To Whom It May Concern,
RE: Smith Super Pty Ltd ATF Smith Superfund
ACCOUNT NUMBER: 123456
Our SMSF is being audited. The Auditor has requested a copy of the loan agreement for the loan noted above.
Can you please provide a copy of the loan agreement directly to our Auditor at the address noted below or advise our Auditor that the loan is a limited recourse loan, where the lender’s recourse is limited to the acquirable asset (as referred to below):
Name: Tom Jones
Firm: Jones Audits
Address:
E-mail:
Phone number: 03 9000 0000
Property Address – 2 Smith Street Smithville, NSW 2200
If you have any questions, please contact either of us.
__________________ _________________
Paul Smith Mary Smith
Director of Smith Super Pty Ltd Director of Smith Super Pty Ltd