ASIC SMSF Auditor Competency Exam flashcards

31 cards. Read the term and the definition here. The deck at the top of this page is optional.

SMSF auditor registration body

ASIC maintains the register of approved SMSF auditors. Registration is a statutory prerequisite to signing an SMSF audit report and is separate from professional body membership.

Eligibility for auditor registration

Requires a tertiary qualification, membership of a recognised professional body, completion of an approved SMSF audit course, and practical experience in auditing superannuation entities.

CPD requirement for auditors

Registered SMSF auditors must complete at least 30 hours of continuing professional education per triennium, including a minimum number of hours specifically related to superannuation or SMSF auditing.

Independence prohibition for auditors

An auditor cannot audit a fund if they are a member or trustee, an employer or employee of a trustee, or in a relationship that compromises objectivity and independence.

Auditor report addressees

The SMSF auditor's report is addressed to the trustees and covers whether the financial statements comply with accounting standards and whether the fund's operations comply with the SIS Act.

Disqualification grounds

Undischarged bankruptcy, conviction for a dishonesty offence, or disqualification from managing corporations generally makes a person ineligible for SMSF auditor registration.

ASIC suspension and cancellation

ASIC may suspend or cancel registration for failing to maintain competency, breaching conditions, providing false information, or being disqualified, with outcomes published on the register.

Notification of prescribed events

Registered auditors must notify ASIC of changes to registration details and circumstances affecting eligibility within the timeframe set out in the registration conditions.

Working paper retention

Audit working papers supporting the opinion must be retained for the statutory period, generally five years, and must be sufficient to evidence the audit procedures performed.

Professional indemnity insurance

An approved SMSF auditor is expected to hold adequate professional indemnity insurance covering SMSF audit work as a condition of registration and professional practice.

Public SMSF auditor register

ASIC's register is searchable by name and registration number and shows registration status, conditions, and disciplinary actions taken against approved SMSF auditors.

Auditor competency course

Completion of an ASIC-approved SMSF audit competency course is a registration prerequisite, ensuring candidates understand SIS Act requirements and audit methodology.

Two-limb audit opinion

The SMSF audit opinion covers financial statements compliance with accounting standards and the SIS Act, and the fund's operational compliance with the SIS Act and regulations.

In-house asset 5% limit

In-house assets must not exceed 5% of total fund assets at year end. An excess requires reporting to ASIC and a written rectification plan.

Sole purpose test

The fund must be maintained solely to provide retirement benefits to members, or benefits to dependants on death, or both. Any collateral purpose breaches the SIS Act.

Arm's-length dealing rule

Investments between the fund and related parties must be on arm's-length terms. Non-arm's-length income is taxed at 45% and may also constitute a SIS Act contravention.

Concessional contributions cap

The annual concessional contributions cap limits tax-deductible contributions. Excess concessional contributions are included in the member's assessable income with a tax offset available.

Non-concessional contributions cap

The non-concessional cap limits after-tax contributions and is linked to the concessional cap. Excess amounts may be released from the fund following an election.

Investment strategy requirement

Trustees must prepare and regularly review a documented investment strategy considering risk, diversification, liquidity, and the ability to discharge member liabilities.

Preservation rules

Benefits must remain preserved until a condition of release is met. The auditor checks that payments were permitted and preservation components were correctly applied.

Market value valuation

Assets, including unlisted and related-party assets, must be valued at market value for reporting purposes. The auditor tests the reasonableness of valuations.

Contravention reporting to ASIC

The auditor must report certain contraventions to ASIC where required and consider whether the fund remains a complying superannuation fund for tax purposes.

Annual return lodgment

The fund must lodge an annual return with the ATO. An audit report must be obtained before lodgment, and the auditor considers whether the return is consistent.

Related party definition

A related party includes members, trustees, their relatives, and entities they control or influence. Transactions with related parties face stricter compliance tests.

Borrowing restrictions

An SMSF may borrow only under a limited recourse borrowing arrangement, with the asset held on trust and the lender's recourse limited to that asset.

Financial statement assertions

Audit procedures test existence, rights and obligations, completeness, valuation, and presentation of fund assets, liabilities, income, and expenses to support the opinion.

Audit materiality

Materiality is the threshold above which omissions or misstatements could influence decisions. It guides the nature, timing, and extent of audit procedures performed.

Trustee declarations

Trustees provide written representations confirming compliance with the SIS Act and the accuracy of information given to the auditor, supporting the audit evidence obtained.

Segregated assets for pensions

Assets supporting retirement phase income streams may be segregated, affecting exempt current pension income calculations and the audit of tax provisions.

Audit sampling techniques

The auditor may use statistical or non-statistical sampling to test transactions and balances, ensuring the sample is representative and conclusions are supported.

Modified audit opinion

A qualified, adverse, or disclaimer opinion is issued when misstatements or scope limitations are material, and the reasons must be clearly stated in the report.