Dear Auditors Insitute,
I am auditing a fund for the first time (two members) that lent monies of the fund (prior 2020) to a related entity representing 90% of the total assets. There is no loan agreement and the loan can not be repaid.
In 2023, one of the member passed away and the loan has been offset against death benefit payments.
I will qualify the audit report and lodge a contravention report for breach of s.65 and In-house sections of the SISA in regards to the loan.
What about the death benefit payments? Is there something I should be mentioning in the Management letter/Audit Report/Contravention Report?
Thank you in advance.
Hi Jean
I have not come across this before.
Based on what you have said the following journal has been raised:
Dr Death Benefit
Cr Loan to a related party
I do not know the answer to your question as I cannot see how you transfer out an asset if it has no value. In the ACR maybe you explain that the loan to a related party has been transferred out as a death benefit expense.
If other members have a view or can assist please let the forum know.
Thanks
The Auditors Institute