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Hi,
My question relates to Bryce Figot's webinar on Tuesday. He states that an auditor should hold a lease document(s) that cover the entire FY for a property. In his view to avoid being sent to ASIC for a review. This question has been asked before and the answer was:
Hi Brent
My view is that if you have rental statements or a summary then you do not have to request a copy of the lease agreement.
It would be great to get other forum members views on this question.
If there is no lease document it was not discussed what the auditor should do? If the rent payments are from a third party and seem to be reasonable and on time, I can see no contravention here? Does Bryce suggest what our response should be?
Hi David,
My approach is to always obtain a copy of the lease agreement.
AUASB GS009 says we "should" obtain lease agreements as part of our evidence.
It is also listed in the ATO's Compliance Audit guidance page, particularly under S109. The ATO states that leases form part of the minimum evidence requirements when auditing compliance with S109. In my view, it would mean we haven't obtained sufficient evidence to sign off on S109 if we don't inspect the lease agreement relating to rental income.
Moreover, I refer to ASIC's media releases about disqualifying or punishing auditors. In a few cases, they cite the auditor did not "ensure property leases are arm's length" as reasons for action against said auditors. The only way to know for sure is to inspect the lease.
In my view, even when an agent manages the property, there is no way of knowing who the true parties to the lease are and whether it is arm's length unless a lease agreement is inspected. It brings into question more than just S109.
I am aware many auditors do not request lease agreements. Indeed, some accountants have accused me of making superfluous requests when asking for lease agreements. I refer them to resources from AUASB, ATO and ASIC that mention the expectation of us to inspect lease agreements.