What is the difference between an SMSF Auditor and an SMSF Accountant?
The role of a self-managed superannuation fund (SMSF) accountant and a SMSF auditor are complementary whilst also having roles which are separate and distinct from each other.
What role does the SMSF Accountant undertake?
The main role of a SMSF accountant is to prepare the financial statements and the annual tax return for a SMSF trustee and its members based on records provided by the trustee.
An SMSF accountant specialises in and understands superannuation laws and regulations and can assist the SMSF trustees to meet their obligations under SISA, the tax act and Australian Securities and Investments Commission (ASIC) in relation to a corporate trustee.
The trustee (working with their SMSF Accountant) records contributions, investment income, fund expenses and member payments and maintains trustee records such as trustee minutes or resolutions to detail how the trustees made their decisions, changes to trustees and the fund’s governing rules and member details.
An SMSF accountant assists a trustee with many of the items above and the following:
- manage contribution caps
- account for and report new pensions and partial or full pension commutations to the ATO in a transfer balance cap report (TBCR)
- reporting and lodging GST returns, PAYG instalments or withholding
- obtaining an actuary certificate to determine the fund’s pension exempt income percentage
- arrange for an audit of the fund
- lodge the SMSF annual return before the due date.
An SMSF accountant can also provide advice in relation to tax matters and respond to trustee queries about compliance with SISA. They can also assist in the paperwork to establish a SMSF, organise a corporate trustee or a change of trustee as well as the establishment of a limited recourse borrowing arrangement.
What role does the SMSF Auditor undertake?
The SMSF auditor reviews the fund’s financial statements and undertakes an audit of the fund’s compliance with SISA as well as an audit of the financial statements.
The auditor provides the trustee with an independent audit report and an auditor’s management letter advising them of any SISA breaches or financial issues they have come across during the audit. The auditor can also lodge an auditor’s contravention report with the ATO for serious breaches of SISA.
An auditor must be an approved SMSF auditor and registered with ASIC. A SMSF auditor must have practical auditing experience, have a qualification such as a degree in accounting and be a fit and proper person. Ongoing requirements include completing ongoing education, comply with competency standards issued by ASIC and continue to hold professional indemnity insurance. A SMSF auditor must also continue to comply with auditor independence requirements as per APES 110 – Code of Ethics for Professional Accountants as a condition of their ASIC registration. An auditor must be independent of mind and appearance.
Example – Independence standards for SMSF approved auditor
Fred’s accounting services undertakes the SMSF audits for ABC accounting and ABC accounting undertakes the SMSF audits for Fred’s accounting services.
An SMSF audit cannot be undertaken by the same SMSF accounting firm or with another firm with a reciprocal arrangement. Fred’s accounting services and ABC accounting cannot undertake the SMSF of each other’s SMSF clients.
How do the SMSF Accountant and the SMSF Auditor work together?
The ATO heavily relies on audits to ensure SMSFs comply with SISA and maintain proper financial records. Historically, an SMSF accounting firm audited their own clients using a partner who did not participate in other work for the client group. The ATO raised concerns about independence threats, especially when firms rely heavily on fees from a single client.
Legislation was introduced to ensure an SMSF auditor is truly independent. This means SMSF accounting firms have to outsource audits to independent SMSF auditors who are licensed with ASIC.
Roles of the SMSF accountant and an SMSF auditor are now much more clearly defined and separate. The SMSF accountant prepares financial statements, while the auditor verifies them.
The ATO focus is on the related party nature of an SMSF.
The ATO focus on valuation of fund assets, related party transactions such as property acquisitions or disposals, acquisition of private unit trusts or companies, lending money to a related party, leasing properties to related parties, and assessing whether these transactions are conducted at arm’s length.
The SMSF accountant and auditor work closely together to obtain supportable independent audit evidence from the trustee such as annual asset valuations and valuation of the assets at critical times such as starting a pension, acquiring or selling a fund asset to a related party and the death of a member.
The SMSF accountant collaborates with the auditor to address and resolve any audit queries and connects the trustee with the auditor.