Sep15 Guidance Statement GS 009 - AUASB

1 GS 009 (September 2015) Guidance Statement GS 009 Auditing Self-Managed Superannuation Funds Issued by the Auditing and Assurance Standards Board GS 009 - 2 - Guidance Statement Obtaining a Copy of this Guidance Statement This Guidance Statement is available on the Auditing and Assurance Standards Board ( AUASB ) website: Contact Details Auditing and Assurance Standards Board Podium Level, Level 14, 530 Collins Street Melbourne Victoria 3000 AUSTRALIA Phone: (03) 8080 7400 Fax: (03) 8080 7450 E-mail: Postal Address: PO Box 204, Collins Street West Melbourne Victoria 8007 AUSTRALIA COPYRIGHT 2015 Auditing and Assurance Standards Board ( AUASB ). The text, graphics and layout of this Guidance Statement are protected by Australian copyright law and the comparable law of other countries. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source as being the AUASB .

2 Requests and enquiries concerning reproduction and rights for commercial purposes should be addressed to the Executive Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne Victoria 8007 or sent to Otherwise, no part of this Guidance Statement may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law. ISSN 1833-7600 Guidance Statement GS 009 Auditing Self-Managed Superannuation Funds GS 009 - 3 - Guidance Statement CONTENTS AUTHORITY Statement Paragraphs Application .. 1-2 Issuance Date .. 3 Introduction .. 4-10 Definitions .. 11-13 Trustees Responsibilities .. 14-15 Auditor s Responsibilities .. 16-25 Preliminary engagement Activities .. 26-56 57-70 Risk Assessment Procedures .. 71-74 Materiality .. 75-77 Audit Evidence .. 78-99 Audit Documentation .. 100-111 Representations .. 112-118 Service 119-123 Using the Work of a Service Auditor.

3 124-126 Using the Work of an Expert .. 127-132 PART A FINANCIAL AUDIT .. 133-134 Financial Reports .. 135-137 Assertions and Audit Evidence .. 138-140 Materiality .. 141-144 Opening Balances .. 145-150 Cash and Cash Equivalents .. 151-155 Investments .. 156-177 Receivables and Prepayments .. 178-180 Liabilities .. 181-185 Accrued Benefits .. 186-189 Vested Benefits .. 190-192 Reserves .. 193-200 Investment and Other Revenue .. 201-203 Contributions and Transfers In .. 204-207 Expenses .. 208-211 Tax Expense .. 212-227 Benefits Paid .. 228-236 Other Audit Considerations .. 237-248 Reporting .. 249-265 Guidance Statement GS 009 Auditing Self-Managed Superannuation Funds GS 009 - 4 - Guidance Statement PART B COMPLIANCE engagement .. 266-268 Materiality .. 269-270 Establishment and Operation of the SMSF .. 271-283 Sole Purpose .. 284-294 Investment Considerations .. 295-328 Benefit Restrictions .. 329-341 Contribution Restrictions .. 342-351 Investment Returns.

4 352 Solvency .. 353-354 Other Regulatory Information .. 355-356 Other Compliance engagement Considerations .. 357-359 Reporting Compliance Breaches .. 360-367 APPENDICES Appendix 1: Example of an engagement Letter for the Audit of a Self-Managed Superannuation Fund Appendix 2: Example of a Self-Managed Superannuation Fund Trustee Representation Letter Appendix 3: Self-Managed Superannuation Fund Governing Rules Preliminary Understanding Checklist Appendix 4: Illustrative Financial Audit Procedures for a Self-Managed Superannuation Fund Appendix 5: Illustrative Examples of Threats to Independence in a Self-Managed Superannuation Fund Guidance Statement GS 009 Auditing Self-Managed Superannuation Funds GS 009 - 5 - Guidance Statement AUTHORITY Statement The Auditing and Assurance Standards Board ( AUASB ) formulates Guidance Statement GS 009 Auditing Self-Managed Superannuation Funds, pursuant to section 227B of the Australian Securities and Investments Commission Act 2001, for the purposes of providing Guidance on auditing and assurance matters.

5 This Guidance Statement provides Guidance to assist the auditor to fulfil the objectives of the audit or assurance engagement . It includes explanatory material on specific matters for the purposes of understanding and complying with AUASB Standards. The auditor exercises professional judgement when using this Guidance Statement . The Guidance Statement does not prescribe or create new requirements. Dated: 30 September 2015 M H Kelsall Chairman - AUASB GS 009 - 6 - Guidance Statement Guidance Statement GS 009 Auditing Self-Managed Superannuation Funds Application 1. This Guidance Statement has been formulated by the Auditing and Assurance Standards Board ( AUASB ) to provide Guidance to auditors conducting: (a) an audit of a self-managed superannuation fund s (SMSF s) special purpose financial report, (financial audit); and (b) an audit of a SMSF s compliance with the Superannuation Industry (Supervision) Act 1993 (SISA) and the Superannuation Industry (Supervision) Regulations 1994 (SISR) (compliance engagement ).

6 2. This Guidance Statement does not apply to audits of Australian Prudential Regulation Authority (APRA) regulated superannuation Issuance Date 3. This Guidance Statement is issued on 30 September 2015 by the AUASB and replaces GS 009 Auditing Self-Managed Superannuation Funds, issued in September 2013. The content of this Guidance Statement includes reference to legislative requirements which came into effect during 2014 and 2015. Introduction 4. SMSFs are a specific type of superannuation fund which have fewer than five members and are regulated by the Australian Taxation Office (ATO). In addition, the SISA2 gives ASIC the responsibility for the registration of approved SMSF auditors and setting competency standards. SMSFs are primarily governed by the requirements of the SISA, SISR, the Income Taxation Assessment Acts 1936 and 1997 (ITAA) and a fund s governing rules, which include the trust deed and applicable legislation. Complying SMSFs are eligible for tax concessions, and may also receive Superannuation Guarantee (SG) contributions.

7 Complying SMSFs are Australian superannuation funds, which meet the requirements of the SISA and SISR and are regulated 3 under the SISA. 5. The SISA, subsection 35C(1), requires SMSFs to be audited each financial year by an approved SMSF auditor (the auditor),4 who is required to complete both the financial audit and the compliance engagement and sign the auditor s report before a SMSF may submit its Annual The auditor reports to the trustees6 in the approved form , as issued and updated from time to time, by the ATO,7 which includes opinions under two sections: (a) Part A: Financial report; and (b) Part B: Compliance report. 1 Auditors of APRA regulated superannuation entities, particularly auditors of small APRA funds, may find this Guidance Statement useful in planning, conducting and reporting their audits, but it does not relate specifically to APRA funds. 2 See Division 1, Section 6 of the SISA.

8 3 Regulated funds, under section 19 of the SISA, are funds which have a trustee, either a corporate trustee or governing rules which contain a pension fund and have made an irrevocable election to become regulated in the approved form within the specified time. 4 Approved SMSF auditor is defined in paragraph 13. 5 The SMSF Annual Return (NAT 71226) comprises income tax reporting, regulatory reporting and member contributions reporting. 6 The use of the terminology trustee and trustees is used interchangeably throughout this document. Trustee or trustees include individual trustees, collective group trustees or a trustee body of a SMSF. 7 The approved form auditor s report is contained within the Instructions and form for approved SMSF auditors - Self-managed superannuation fund independent auditor s report (NAT11466). The auditor s report is available from the ATO s website Guidance Statement GS 009 Auditing Self-Managed Superannuation Funds GS 009 - 7 - Guidance Statement 6.

9 This Guidance Statement has been developed to identify, clarify and summarise the existing responsibilities which the auditor has with respect to conducting SMSF audits, and to provide Guidance to the auditor on matters which the auditor considers when planning, conducting and reporting on the financial audit and compliance engagement of a SMSF. 7. This Guidance Statement does not extend the responsibilities of the auditor beyond those which are imposed by the SISA, SISR, Australian Auditing Standards (Auditing Standards), Standards on Assurance Engagements (ASAEs) or other applicable legislation. 8. This Guidance Statement comprises: (a) an introductory section, which provides Guidance on matters common to both the financial audit and compliance engagement ; (b) Part A, which provides Guidance on the financial audit; and (c) Part B, which provides Guidance on the compliance engagement . 9. This Guidance Statement is to be read in conjunction with, and is not a substitute for referring to the requirements and Guidance contained in: (a) the Australian Auditing Standards , in which references to the auditor includes an approved SMSF auditor conducting the financial audit of a SMSF; (b) applicable Standards on Assurance Engagements , specifically ASAE 3100 Compliance Engagements, in which references to the assurance practitioner include an auditor conducting a compliance engagement of a SMSF; (c) the SISA and SISR; (d) Applicable ATO Rulings, Interpretive Decisions (ID) and Guides and the Income Tax Assessment Acts; and (e) Applicable ASIC Regulatory Guides and Class 10.

10 This Guidance Statement does not provide Guidance on auditing a defined benefit fund9 as these funds are not prevalent as SMSFs. Definitions 11. A SMSF meets the definition of a SMSF of the SISA10 if: (a) it has fewer than five members; (b) each individual trustee or director of the corporate trustee is a member of the fund, unless it is a single member fund, in which case the sole member is either: (i) a director of the corporate trustee or one of two directors who are related or, if unrelated, the member is not an employee of the other director; or (ii) one of two individual trustees who are related or, if unrelated, the member is not an employee of the other trustee; (c) each member of the fund is a trustee or a director of the corporate trustee; (d) no member is an employee of another member, unless they are relatives; and 8 Further detail is available at 9 Defined Benefit Fund defined in Regulation (1) of the SISR.