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Hi all,
I have just collected the documents for a client that I audited over the past few years. I usually pass the documents off to an accountand to prepare the accounts and tax return. The fund's only investment was paid out in 2021 and so now the fund only holds cash. The funds only income is interest which is minimal. There is only interest, pension withdrawals and expenses (accounting, audit and the SMSF Levy) on the bank statements which are only two pages (only about 12 transactions.)
I have reviewed the bank statements with the Trustees and they have advised me of how the interest and pensions could be split. The fund is not taxable.
Can I prepare and accounts and also do the audit based on this information and get the accountants to prepare the tax return ?
Hi Brian
Yes if the accounting is routine or mechanical then you can do the audit of the SMSF (if safeguards have been used to reduce threats to an acceptable level). In your example you could get the tax agent to review the accounts you prepared as a safeguard.
The ATO gives guidance on this at:
"https://www.ato.gov.au/uploadedFiles/Content/SPR/downloads/smsf_auditors_and_auditor_independence_after_1_july_2021.pdf"
"Even where the preparation of the financial statements is routine or mechanical, the Commissioner and ASIC require the auditor to use safeguards to reduce the threats to an acceptable level.
Examples include:
• using professionals who are not audit team members to perform the accounting service
• using an appropriate reviewer not involved in preparing the accounts to review the audit or the accounting service."
Further APES 110 states re "Routine or Mechanical"
"Accounting and Bookkeeping Services that are Routine or Mechanical
601.4 A1 Accounting and bookkeeping services that are routine or mechanical in nature require little or no professional judgement. Some examples of these services are:
• Preparing payroll calculations or reports based on client-originated data for approval and payment by the client.
• Recording recurring transactions for which amounts are easily determinable from source documents or originating data, such as a utility bill where the client has determined or approved the appropriate account classification.
• Calculating depreciation on fixed assets when the client determines the accounting policy and estimates of useful life and residual values.
• Posting transactions coded by the client to the general ledger.
• Posting client-approved entries to the trial balance.
• Preparing Financial Statements based on information in the client-approved trial balance and preparing related notes based on client-approved records."
If you prepare the financial statements you will need to amend the audit report wording re:
"My firm or network firm [select the appropriate option] (did not prepare the financial statements for the fund / did prepare the financial statements for the SMSF but it was only a routine or mechanical service and appropriate safeguards were applied). Where my firm or network firm provided any other non-assurance services to the fund, we are satisfied that those services were not prohibited under the Code and any independence threats arising have been eliminated or reduced to an acceptable level by the application of safeguards."
Thanks
SMSF AAA