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Hello im conducting an Audit of an SMSF where the balance sheet is reporting Sundry Assets of $169,117 at 30 June 2020 (as well as at 30 June 2019, in its comparative) made up of 2 property deposits ($109,117 + $60,000). Supporting correspondence on file included contract of sale, trust account receipt for the money paid to the builder’s solicitor, and a few email’s from the trustee to their accountant explaining a situation where the builder has gone bankrupt 2 years prior and the actions taken (which appeared minimal from the trustee, in my opinion), as well as an ASIC search showing ‘notice of appointment as liquidator’ to Jon-Build Pty Ltd back in March 2019. After reading these emails and looking at all the evidence, and also having a phone conversation with Wendy, the trustee on 18.06.2021 – I felt that the money will never be recoverable – based on a feeling that the builder has gone AWOL, my perception of builders, and also the lack of positive correspondence in relation to this. The trustees have not pursued legal action due to the cost of the legal action potentially being not worth the benefit of recovering the money and potentially losing even more from their super than what they have already.
What other evidence should I have on file?
What actions should I take on this Audit?
Do I Seek amended financials – to what amount? and also based on what?
How should I Finalise my report – with or without qualifications?
Hi Mark
Re the audit evidence my view is you have tried to determine the value and have evidence to support the value being $0. I would also request a declaration from the trustees stating that (on the basis of there being no value):
1) value of the asset is considered to be $0,
2) they do not believe it is worth pursuing further as any cost would outweigh any expected return,
3) the trustees conducted the transactions on an arm's length basis (section 109 SIS),
4) the investment was made on the sole purpose basis (section 62 SIS).
Your query does not refer to other assets of the Fund so I assume the assets are material.
Yes if the value is $0 the financial statements should be amended to reflect this value. If the value is $0 and the financial statements are not amended you should issue a Part A financial qualification and a Part B compliance qualification re Reg 8.02B that requires "when preparing accounts and statements required by subsection 35B(1) of SISA, an asset must be valued at its market value".
If you have concerns re Section 109 and or Section 62 of SIS you may need to qualify re these sections.
Another option is to report what has occurred in the Audit Contravention Report in the area where "other information" can be advised to the ATO based on your professional judgement.
Thanks
SMSF AAA