Financial Statements and Audit Evidence
What the auditor is testing
The financial statements of an SMSF typically include a statement of financial position, statement of changes in equity/net assets, and notes covering investments, member balances, and tax. The auditor gathers sufficient appropriate evidence to support the assertions: existence, rights and obligations, valuation, completeness, and presentation.
Evidence sources
- Third-party confirmations: bank statements, broker statements, registry holdings, property title searches, loan statements.
- Trust deeds and minutes: to confirm trustee powers, member entitlements, and resolutions.
- Contribution and rollover records: to test receipt and allocation.
- Actuarial or valuation reports: for unlisted assets.
Assertions and risk
Apply a risk-based approach: identify significant risks (e.g., unlisted property valuation, related-party loans, pension payments) and design procedures accordingly. Materiality is set with reference to fund size and member balances. Document the audit plan, evidence obtained, and conclusions.
Traps in questions
- Relying solely on trustee representations where independent evidence is available.
- Missing that member statements must reconcile to the general ledger.
- Overlooking the need to test pension minimum payments and account-based pension deductions.
- Failing to consider subsequent events and going concern where the fund is small.
Worked example
If a fund holds a related-party unlisted company, the auditor should obtain the share register, valuation basis, and evidence of arm's-length terms, and consider whether the asset is an in-house asset. Trustee representation alone is insufficient.