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Brian Roughley

Sep 04, 2023

Verifying residential tenant

in SMSF Technical Forum

If an SMSF auditor receives a Residential Tenancy agreement that shows the name of the Landlord as the SMSF and the name of the tenant whereby the names of the trustees/ members of the SMSF are not the same nor similar and the leasing arrangements are conducted exclusively by the real estate agent from a national firm of real estate agents, would that be considered sufficient and appropriate evidence that the lease is to an unrelated party or should the SMSF auditor also obtain a Trustee Declaration to state specifically that the the tenant is an unrelated party pursuant to the SIS Act definition of a related party that captures Part 8 Associates?

The SMSF auditor has been provided with a signed and dated Trustee Representation Letter from the trustees that includes that there are no related party transactions.

1 comment

Comments (1)

The Auditors Institute Ltd

Sep 04, 2023

Hello Brian

Thanks for your question.

An excerpt from the decision in Kingston Cotton Mill Co. (No. 2) (1896) 2 Ch. 279 is provided below:

“An auditor is not bound to be detective and to work with their suspicion, that there is something wrong. He is a watchdog not a blood hound. He is justified in believing tried servant of the company and is entitled to rely upon their representation provides he takes reasonable care”.

With this in mind, given the Trustee Representation Letter and the information gleaned from the Resdiential Tenancny agreement, we would take the view the fund auditor has adequate evidence upon which to conclude that the tenant is not a related party.