Friday, February 27th, 2009 - CJ Baker & Associates
Self Managed Super Funds (SMSF), many of which have lost up to half their value recently, are in danger of losing even more if their audits are not properly conducted says an independent superannuation specialist.

Carolyn Baker, principal of strategic advisers and chartered accountants CJ Baker & Associates, says she is aware that some SMSFs are in danger of losing hundreds of thousands of dollars simply because their auditor doesn’t properly understand the legislation.

“SMSFs have invested more than 30 percent of their portfolios directly into equities according to ATO figures, so a large number have lost considerable value due to the recent economic downturn,” Ms Baker says.

“Engaging an auditor who doesn’t properly understand SMSF legislation can also have a dramatic effect on its value.

“I am aware of some mistakes being made that have cost the value of a fund a further 50 percent, which is money these retirees or potential retirees simply can not afford to lose.”

Ms Baker says the growing number of SMSFs, worth over $358 billion nationally, has also created an industry around it, with auditing targeted as a service on the rise.

“Australia now has almost 750,000 members of SMSFs and its growth is spurning a number of associated business services that offer assistance in the management of these funds,” Ms Baker says.

“Unfortunately many of these services, particularly audits, have been created with an opportunistic view rather than to serve in the best interests of the client.

“SMSF members need to understand the ATO is committed to an ongoing audit compliance program on SMSFs who have not engaged an independent auditor.

“So engaging an auditor is not only a legal obligation, but finding the right one is just as important to retain as much of the value of the fund a possible.”

Ms Baker says when engaging an auditor, members of SMSF’s should look out for someone who understands financial reports and compliance related issues, procedures and controls.

“The competency requirements for auditing an SMSF include the capability of auditors to complete the tasks of planning, evidence gathering, evidence evaluation and decision making,” Ms Baker says.

“There are five key areas an auditor needs to be able to demonstrate these competencies, including client acceptance and retention, audit planning, controls evaluation and testing, substantive testing and forming an opinion.

“It is also mandatory for auditors undertaking an SMSF audit hold a practising certificate issued by the professional accounting body of which they are a member, have relevant professional indemnity cover, undertake continuing professional development, and ensure that those who perform work on their behalf have appropriate knowledge and experience and are properly supervised in the conduct of the audit.”

Ms Baker says auditors should also provide some level of value-added service to clients beyond just finding problems with their fund.

“There should be a focus on providing constructive feedback on what sort of compliance shape your fund is in, rather than just pointing out where things may be wrong,” Ms Baker says.

“All SMSF’s are not the same, so it’s important to ensure your auditor is up with the latest legislation and understands what you are trying to achieve in your retirement.

“Finally you should ensure the level of fees correspond with the level of service provided. Some auditors advertise fix fee audits for as little as $1,000, which while might seem inexpensive, also usually means a cookie cutter template service.

“Some are even offering to do the audit online, which really puts the client in a compromised position as there is little opportunity for frank and open discussion.”

CJ Baker & Associates holds its own independent Australian Financial Service License to provide advice on superannuation law and tax, and is one of the only practices that retains its independence with no in-house financial planners or links to financial planning institutions.

The firm was established in 1996 by Carolyn Baker after senior roles with international firms PriceWaterhouse Coopers and Ernst & Young.

ENDS

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CJ Baker & Associates


CJ Baker & Associates holds its own independent Australian Financial Service License to provide advice on superannuation law and tax, and is one of the only practices that retains its independence with no in-house financial planners or links to financial planning institutions.
Bruce Nelson
P: 0423 403 449
M: 0423 403 449.
W: accountantlist.com.au/1170-C-J-Baker--Associates.aspx

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Self Managed Super Funds (SMSF), many of which have lost up to half their value recently, are in danger of losing even more if their audits are not properly conducted says an independent superannuation specialist.

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