A couple of key cases this year have led to major settlements against the auditors of SMSFs for failing to let the trustees know of dodgy investments.
In both instances, the trustees of the SMSF invested with a trusted friend or adviser, who also owned a percentage of the firm preparing the financial statements of the SMSF and who ultimately scammed them out of their investment.
When I audit a club or association, I automatically qualify the audit report every single time, with something like: “As is common for organisations of this type, it is not practicable for the club to maintain an effective system of internal control over cash receipts until their initial entry in the accounting records. Accordingly, as the evidence available to us regarding revenue from XXX activities was limited, our audit procedures with respect to XXX activities had to be restricted to the amounts recorded in the financial records. We, therefore, are unable to express an opinion whether all income relating to XXX activities is complete.”
This protects me from the fact that I can’t ascertain that all income has been banked and, to be frank, the most likely time that money goes missing in a small club or association is before it is banked.
How to avoid litigation as an SMSF Auditor
Click here to read Effective PD Director Deanne Firth’s full article on how SMSF auditors can avoid litigation. To learn more about this topic, subscribe to Effective PD’s webinar. To subscribe, visit www.effectivepd.com.au. Effective PD offers an innovative way for busy accountants to be on top of their game with continuing professional development in a brief, flexible and easy way.
