Engage Super Audits is among a small group of accountants that has decided to specialise in SMSF auditing over the past two decades. It audits about 3,000 funds each year. Engage’s founder and CEO, Jo Heighway, says her firm often sees administration problems with accounting practices that have between 100 and 200 SMSFs under administration.
These firms don’t have enough super funds to justify having full-time staff. The part-time staff charged with SMSF administration sometimes make mistakes because they’re dealing with an ever-changing environment and they may not be aware of what they don’t know.
Typical areas that cause problems here include the ownership of assets and correct accounting for payments. Heighway says it’s common to see contributions recorded incorrectly – not only concessional contributions recorded as non-concessional contributions (and vice versa), but contributions recorded against the wrong members. There is often an incorrect assumption that property can be defined as business real property, she says, when closer inspection shows it fails legislative tests.
For the process to work smoothly, she argues, it should be automated with electronic access to the fund accounts and papers.
And she says SMSF auditors must stop:
- obsessing with paper;
- building Excel spreadsheets and calling them technology;
- building technology that duplicates what’s already been done;
- doing the same thing as last year;
- creating barriers between systems and clients;
- using one-size-fits-all audit programs; and
- ignoring the digital revolution.
Shaking off old habits
Not all SMSF audit firms agree with these ideas. There are still some audit firms that prefer to see physical copies of all documents and don’t want to change their systems or processes.
This reliance on a manual approach makes life more difficult for fund administrators; they have to go to the hassle of dispatching physical copies of documents. That can mean an administrator needs more staff simply to satisfy the needs of the auditor. The race for efficiency in SMSF administration is definitely in full swing so any roadblock to achieving fewer administrators per fund will likely earn an auditor a black mark.
One SMSF auditor notes that some accounting practices don’t necessarily perceive what is required to complete an audit. One practice, for example, couldn’t understand why the auditor wanted to see copies of bank statements and proof that all assets were correctly owned, because the practice itself regularly reviewed clients’ files and verified all bank transactions. The accounting practice said it thought audits could be completed by referring primarily to the balance sheet.
This accounting practice might, of course, have been outsourcing for the first time audit responsibilities that they had previously performed in-house. Obviously, they need some education about what SMSF auditors are actually meant to be looking at. But perhaps more importantly, what this practice really needs is to work constructively and openly with an SMSF auditor so that they both do what’s required in a timely fashion.
This issue is not fully solved by technology. It has to be solved by communication between all the parties.
