Audit SMSF Checklist

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Audit SMSF Checklist

  1. 1. To be completed by the Reviewer SMSF AUDIT ENGAGEMENTS CHECKLIST MEMBER CODE: _____________________________ REVIEWER: _____________________________ DATE OF REVIEW: This checklist is for use at Quality Assurance Reviews of NIA Members in Public Practice. It is only for reviews of audits of Self Managed Superannuation Funds. There is a separate checklist for other types of audits. There is a separate column for each file you review. Where more than one NIA Public Practice Member is engaged in the practice, use a separate copy of the checklist for each Member. SUMMARY The reviewer is checking the auditor’s compliance with the NIA’s Professional Statements and Auditing Standards, which in turn means assessing whether the auditor has addressed the fund’s compliance with superannuation and taxation legislation. SMSF audits require forming an opinion on the fair presentation of the financial statements, and whether the trustees have complied with nominated sections of the Superannuation Industry (Supervision) Act and Regulations, referred to in this checklist as s.XXX and r.XXX respectively. The Australian Auditing and Assurance Standards Board (AuASB) issues Australian Auditing Standards (ASA), which form the main basis for this checklist, and Auditing Guidance Statements (AGS). Pronouncement Number 8 Conforming with Audit Standards sets out the NIA’s requirements that members must comply with Australian Auditing Standards when conducting audit or assurance engagements, and that Auditing Guidance Statements may be a useful guide. Pronouncement Number 3 Conformity with Accounting Standards and Urgent Issues Group Consensus Views includes requirements for audit, as well as preparation, of financial reports, so is relevant for this checklist. It includes definitions of Special & General Purpose Financial Reports etc. Type Of Entity File Code F Superannuation fund s self-managed super fund N Review of SMSF Audit Engagements April 2007 Page 1 of 11 /home/pptfactory/temp/20100513121829/audit-smsf-checklist3119.doc
  2. 2. Reviewer's Comments Document/Records Seen File 1 File 2 File 3 File 4 File 5 File 6 (enter file identification/ code eg file number – abbreviate here & list elsewhere if necessary) 1. ACCEPTANCE OF ENGAGEMENT 1.1 Has the engagement partner confirmed that appropriate engagement acceptance / continuance procedures have been followed, concluded on and documented, including considering ethical compliance and engagement terms at the beginning of the audit consistent with the auditor’s policy? (ASA 220.17, ASA 300.9) 1.2 Did the procedures include consideration of: (A) client integrity (eg repeated SIS breaches); (B) competence, time and resources of the engagement team, including setting an audit budget; (c) capacity of firm and team to comply with ethical requirements; (D) capacity of the engagement team to perform the audit in accordance with Auditing Standards, regulatory and legal requirements (r.1.04(2)); (E) whether to continue the engagement, and/or revise terms of engagement (SQC 28, ASA 210.18, 220.17); and (f) ability to issue an audit report appropriate to the circumstances. (ASA 220.19, 220.23, 300.9) 1.3 For an initial audit involving change of auditor, has the auditor completed and documented ethical communications with the previous auditor? (ASA 300.31) 1.4 For an initial audit, has the auditor obtained sufficient appropriate evidence on opening balances, such as from review of previous auditor’s workpapers (eg evidence about prior periods and internal controls), or auditing opening balances directly, or qualified the audit report? (ASA 300.31) 1.5 Is there any evidence that the engagement partner has information that, if received earlier, would have caused the firm to decline the engagement? If so, has appropriate action been taken? (SQC 34, ASA 220.22) 2. TERMS OF ENGAGEMENT 2.1 Does the file show the auditor recorded the agreed terms of engagement and forwarded them to the client? (ASA 210.5, ASA 300.9) 2.2 Does the scope of the engagement include at least the minimum opinions required by the SIS Act? (ASA 210.5, 210.10, s.113) 2.3 Do terms identify the applicable financial reporting framework as general purpose or special purpose? (ASA 210.17) Is it clear from documentation that the client accepts responsibility for the selection of the framework? (Pronouncement 3, ASA 200.5) 3. INDEPENDENCE 3.1 Do the workpapers identify the engagement team? (ASA 220.5) 3.2 Is there any evidence of threats to independence which were clearly not insignificant? Examples include: • provision of non-assurance services such as accounting, taxation and financial advice to the client; • long association of the signing auditor with the client; Review of SMSF Audit Engagements April 2007 Page 2 of 11 /home/pptfactory/temp/20100513121829/audit-smsf-checklist3119.doc
  3. 3. Reviewer's Comments Document/Records Seen File 1 File 2 File 3 File 4 File 5 File 6 • client fees (including related parties of the SMSF) being a significant proportion of total firm fees; • close business, family or personal relationships with the client, its directors, owners or other key personnel; • audit firm personnel or their related parties serving as a trustee of the fund or director of a related party client; • former personnel of the audit firm employed by the client, or vice-versa; and • financial interests in, or loans or guarantees to or from, the client. (Pronouncement 1.290) Have appropriate safeguards been applied and documented? (ASA 220.15(a)-(c)) 3.3 If the firm has provided any financial statement preparation, bookkeeping, taxation or compliance services to the client, how was the self-review threat reduced to an acceptable level? (Pronouncement 1 290.177-179) Note that threats cannot be reduced to an acceptable level if the auditor/firm has provided financial planning advice about the investments of the fund, or has operated or managed the fund on the trustees’ behalf. See also NIA SMSF Approved Auditors Guide. 4. PLANNING AND INTERNAL CONTROLS 4.1 Is there a documented audit plan showing how work will be performed effectively and so as to reduce audit risk to an acceptable level? (ASA 300.5, 300.12, 300.13, 300.18, 300.27) 4.2 Did the plan: • identify the trustees and the background of the fund (ASA 260.9, 315.5) • identify the tax and super legislation that may have a material effect on the financial report? • document the internal control environment, including the areas of trustee decisions, investments, contributions and benefits and financial reporting (ASA 315.52, 315.79, 315.89, 315.95, 315.103, 315.105, 315.113) • show how the audit team will be directed, supervised and their work reviewed (ASA 300.23) • assess the risk of material misstatement at both financial report level and assertion level for classes of transactions, account balances, compliance assertions and disclosures, including misstatement due to fraud (ASA 240.6, 240.52, 240.61, 315.117, 315.143(c)) • show the overall audit responses to address identified risks (ASA 330.6, 330.8, 330.12) and links to audit procedures / programs (ASA 300.20, ASA 330); and • record discussion of the plan with the client? 4.3 Did planning include documenting enquiries of trustees and their responses about how they assess risk of material financial misstatement, including due to fraud? (ASA 240.38, 240.47) 4.4 If the auditor has concluded that the presumption of risk of material misstatement due to fraud related to revenue recognition is not applicable to the circumstances of the engagement, have the reasons for that conclusion been documented? (ASA 240.119) Review of SMSF Audit Engagements April 2007 Page 3 of 11 /home/pptfactory/temp/20100513121829/audit-smsf-checklist3119.doc
  4. 4. Reviewer's Comments Document/Records Seen File 1 File 2 File 3 File 4 File 5 File 6 4.5 Did the member determine and document materiality: • by making a preliminary materiality assessment and reviewing it at the conclusion of the audit (ASA 315.12); • assessing whether uncorrected misstatements are material individually or in aggregate? (ASA 300.13, 320.5, 320.9, 320.27) 4.6 Has the auditor obtained an understanding of the selection and application of accounting policies (eg investment valuation) and considered whether they are: • appropriate for the fund; and • consistent with the applicable financial reporting framework and industry standards? (ASA 315.36) 4.7 Were audit procedures (including inspecting correspondence with the ATO) identified that would help identify instances of non-compliance with the identified laws and regulations, and were they performed? (ASA 250.23) 4.8 Did the auditor document whether any update or change to the overall audit strategy and the audit plan was necessary during the course of the audit, and if so, the details? (ASA 300.21, 300.27) 5. WORKING PAPERS 5.1 Are the working papers sufficiently complete and detailed to be understood by an experienced auditor with no prior knowledge of the engagement? (ASA 230.11) 5.2 Do the workpapers identify: • a program of procedures / audit steps; • appropriate cross-references and indexing, including references that link the audit file to the final financial statements; • the meaning of audit ticks and marks • characteristics of specific items or matters that were tested (e.g. invoice numbers, sample sources, dates and names of client personnel interviewed)? (ASA 230.14) • nature and outcomes of discussions with trustees, professional advisors etc? (ASA 230.18) 5.3 Do the workpapers identify: • who performed the work and on what date; • who reviewed the work and when; and • the extent of review? (ASA 230.26) (NB: Not every work paper has to show evidence of review) 5.4 Do the workpapers reflect an attitude of professional scepticism (eg not simply accepting trustee assertions)? (ASA 200.21, 240.27, 250.5, 250.18, 250.27)? 5.5 Record the format and location of the workpapers, e.g.: • physical file(s) in fire safe cabinets • electronic files on network • archived electronic files etc 5.6 Has a retention period been identified for this engagement’s workpapers consistent with the auditor’s policies and procedures for maintaining confidentiality, safe custody, integrity, accessibility, and retrievability of the documentation? Do prior year workpapers appear to have been kept for the retention period? (ASA 230.31, 230.37, SQC 94) 6. AUDIT EVIDENCE – GENERAL Review of SMSF Audit Engagements April 2007 Page 4 of 11 /home/pptfactory/temp/20100513121829/audit-smsf-checklist3119.doc
  5. 5. Reviewer's Comments Document/Records Seen File 1 File 2 File 3 File 4 File 5 File 6 6.1 Has the auditor: • tested adjusting entries made in the final preparation of the financial report; • reviewed accounting estimates for biases that could result in material misstatement due to fraud; and • understood all significant transactions, including large or otherwise unusual items? (ASA 240.80) 6.2 Was sufficient appropriate audit evidence obtained to confirm material loans / receivables balances? If done by other than direct confirmation, was this justified in writing? (ASA 505.5) 6.3 Was a bank audit certificate obtained before the audit report was signed? If not, was sufficient appropriate audit evidence in relation to bank balances and absence of charges obtained? (AGS 1002.03) 6.4 Was enquiry made, including of all members, about the existence of any litigation or claims? (ASA 508.5, 11, 33, 35) 6.5 Has the auditor documented audit procedures that consider all material events that may have occurred between reporting date and the date of issue of the audit report? (ASA 560.8, 12) 6.6 Did the auditor become aware of possible non-compliance with a law or regulation with material financial report / audit report impact? Has appropriate audit evidence been obtained, findings documented and discussed with management? (ASA 250.24, 250.34) If there is such possible non-compliance, complete supplementary questions in Section 13 6.7 Did the auditor obtain sufficient appropriate evidence that fair value measurements and disclosures are in accordance with the fund’s accounting policies? (ASA 545.7) 6.8 Was sufficient appropriate audit evidence obtained regarding the identification of related parties and the effect of related party transactions, including lists supplied by the client? (ASA 550.5, 7, 18) 6.9 If fund assets are managed by a third party, has sufficient appropriate evidence been obtained from the auditor of that party, or by direct audit, including assessment of the external party’s internal controls? (ASA 402.13, 19) 6.10 If the work of another external professional is used, for example a valuer or actuary, can the member demonstrate that the scope and content of the work is adequate to be relied upon? (ASA 600.14, 620.17, 19, 610.20) 6.11 Has there been consultation with anyone outside the audit team (eg tax, legal or superannuation opinion)? If so: (a) have the conclusions reached been documented and agreed by the consulted party? (ASA 220.34(c)); and (b) has the partner determined that the conclusions from the consultation have been implemented? (ASA 220.34(d)) Review of SMSF Audit Engagements April 2007 Page 5 of 11 /home/pptfactory/temp/20100513121829/audit-smsf-checklist3119.doc
  6. 6. Reviewer's Comments Document/Records Seen File 1 File 2 File 3 File 4 File 5 File 6 6.12 Were written representations obtained from trustees: (a) on specific material matters when other sufficient appropriate audit evidence could not reasonably be expected to exist (eg qualification as trustee); (ASA 580.09) (b) acknowledging its responsibilities for the design and implementation of internal control to prevent and detect fraud (ASA 580.12); (c) disclosing management’s fraud risk assessment results and its knowledge of suspected, alleged or known fraud; (ASA 240.42, 240.50240.96) (d) disclosing all known actual or possible non- compliance with laws and regulations whose effects shall be considered when preparing the financial and audit report; (ASA 250.29) (e) that uncorrected misstatements have been brought to their attention by the auditor and management consider them to be immaterial individually and in aggregate? (ASA 320.35, 580.12) Has a summary of those misstatements been received in writing as part of those representations? 7. AUDIT EVIDENCE – SUPERANNUATION AREAS 7.1 Do the workpapers show that the auditor has performed, documented and concluded on procedures designed to provide sufficient appropriate evidence that: • Fund is an eligible fund (eg listed on ROCS website) • Trustees are not disqualified persons (s.121) • Minutes / secretarial records are retained for at least 10 years (s.103) • Accounting records are retained for at least 5 years (s.111) • Accounts meet SIS requirements (s.112) • Auditors requests for documents are met (s.113(1A)) • Trustee notifies ATO of suspicion of significant adverse financial effect within 4 days (s.106) • Investments exist and are in trustees name (s.52, ASA) • Investments are consistent with a compliant investment strategy (s.52, r.4.09) • Investments meet the sole purpose test (s.62, APRA Circular III.A.4)) • In-house assets are within allowed restrictions (s.69 – 71, 73 - 75, 80 – 85, APRA Circular II.D.6) • Acquisitions of assets from related parties are within allowed limits (s.66) • Investments are at arms-length (s.109) • Fund does not provided financial assistance (s.65) • Fund does not borrow unless excepted (s.67) • Trustees do not permit a charge to exist over fund assets or members’ benefits, or recognised any assignment of benefits (r.13.12 -13.14) • Contributions are only accepted after trustees confirm they are in accordance with SIS requirements (r.7.04) • Minimum benefits are maintained in accordance with SIS requirements (r.5.08) • Benefits are only cashed, rolled over or released in accordance with SIS requirements (r.6.17) • Any additional requirements agreed to in the scope of engagement Review of SMSF Audit Engagements April 2007 Page 6 of 11 /home/pptfactory/temp/20100513121829/audit-smsf-checklist3119.doc
  7. 7. Reviewer's Comments Document/Records Seen File 1 File 2 File 3 File 4 File 5 File 6 7.2 If investments include unlisted securities or physical assets such as real property, classic cars etc, do the workpapers address SIS compliance, existence (eg title search, location), valuation and insurance as appropriate? 7.3 Where market values of assets are not recorded in the financial statements, has the auditor concluded that the trustees were aware of those values and are thus monitoring fund performance? (ATO Circular 2003-1) 7.4 Where benefits are paid, is there evidence that the auditor has confirmed their calculation and their receipt by the relevant member or beneficiary? 7.5 Has the auditor confirmed whether the fund has recorded members’ Tax File Numbers, or paid appropriate higher tax on contributions ? 7.6 Were any issues identified incorporated into audit assessments and adequately addressed (eg by additional testing, reporting to trustees, aggregated into uncorrected misstatements)?) 8. REVIEW OF ENGAGEMENT AND CONCLUSIONS 8.1 Does the engagement partner appear to have taken responsibility for the direction, supervision and performance of the audit? (ASA 220.25) 8.2 Do the workpapers record discussions and conclusions of the audit team of: • risk of material misstatement in the financial report, including due to error or fraud at both the financial statement level and the assertion level? (ASA 240.30, 240.116, 315.20, 315.143(a)) • differences of opinion (if any) between them (ASA 220.94, 220.38) 8.3 Were analytical procedures applied when concluding whether the financial report as a whole is consistent with the member’s knowledge of the fund (ASA 520.25), and address any significant fluctuations identified? (ASA 520.27) 8.4 If there has been fraud or financial report misstatement, has the auditor adequately considered and documented the implications for the audit, including withdrawal from the engagement, where allowed? (ASA 240.111) 8.5 Did the member conclude on the use of the going concern basis / solvency of the fund? (e.g. considered need to report under SIS s 130) (ASA 570.5, 39) 8.6 If the file records uncorrected misstatements found during the audit, has the auditor: • aggregated them with any reported by management to see if the overall effect was material (ASA 320.27) • sought corrections by the trustees of all but clearly trivial ones, before evaluating the effect of the remaining uncorrected misstatements (ASA 320.24) • informed trustees of the individual and aggregate amounts determined by management to be immaterial to the financial report as a whole? (ASA 260.17) 8.7 Is there any information, contradicting or inconsistent with the auditor’s final conclusion, for which the auditor has not documented how the contradiction or inconsistency has been addressed? (ASA 230.20) 8.8 Has the engagement partner concluded whether the audit team complied with ethical requirements relating to audit engagements (ASA 220.11)? Review of SMSF Audit Engagements April 2007 Page 7 of 11 /home/pptfactory/temp/20100513121829/audit-smsf-checklist3119.doc
  8. 8. Reviewer's Comments Document/Records Seen File 1 File 2 File 3 File 4 File 5 File 6 8.9 What was the date the audit opinion was formed? Has the auditor concluded that sufficient audit evidence has been obtained to support the conclusions and report, and does it appear to have been obtained before the audit report was signed? (ASA 220.30, 700.54) Does the final file appear to have been assembled on a timely basis? (ordinarily within 60 days after issue of the audit report) Does there appear to have been any modification to workpapers after the assembly of the final audit file, and if so, have the details and effect, if any, on the opinion, been documented? (ASA 230.5, 230.28, 230.34, 230.35) 9. AUDIT REPORT 9.1 Record the type of financial statement and SIS compliance audit opinions the member issued: • unmodified (UM) • emphasis of matter (EOM) • qualified [except for] (E) • adverse (A) • disclaimer of opinion (D) 9.2 Are those opinions appropriate given the evidence obtained? 9.3 Does the audit report comply with SIS s113 and any ATO prescribed format, containing:: • the title, including the word “independent” (ASA 700.23) • the addressee (ASA 700.25) • introductory paragraph, including identification of the entity, identification of the financial statements and SIS declarations audited, and date and period covered by the financial report (ASA 700.27) • statement about the responsibility of the trustees for the financial report (ASA 700.33) • statement that the auditor’s responsibility is to express an opinion on the financial report and SIS compliance based on the audit, and description of the audit (ASA 700.37, 700.39, 700.42, 700.43) • a section addressing any emphasis of matter accompanying the opinion (ASA 701.9, 11, 15, 17, 19) • a financial statement opinion and a compliance opinion in paragraphs headed Auditor’s Opinion, Qualified Auditor’s Opinion, Disclaimer of Audit Opinion or Adverse Audit Opinion (ASA 700.45, ASA 701.22-24) • any auditor’s opinion on other matters (if applicable – eg expanded scope over prudential requirements and strategy ) (ASA 700.51) • auditor’s signature (name of audit firm, audit company or personal name, consistent with the engagement) (ASA 700.53) • date of signing the audit report (ASA 700.54) • auditor’s practice location (address) (ASA 700.58) 9.4 Is there evidence on file that: • trustees signed the financial report before the auditor signed the audit report; • the audit report was completed by the deadline (SIS s36 and Reg 8.03) • the ATO return was lodged after the auditor has signed the audit report? (look at prior year) (ASA 700.54, ASA 580.7) Review of SMSF Audit Engagements April 2007 Page 8 of 11 /home/pptfactory/temp/20100513121829/audit-smsf-checklist3119.doc
  9. 9. Reviewer's Comments Document/Records Seen File 1 File 2 File 3 File 4 File 5 File 6 General Purpose Financial Report 9.5 Does the file document the assessment of whether, in all material respects, the financial report is presented fairly in accordance with Accounting Standards and other mandatory reporting requirements? If the member concludes that the report is not prepared in accordance with Accounting Standards and Interpretations did the member issue a qualified audit report? (ASA 700.44-46, ASA 701.34-36) Special Purpose Financial Report 9.6 Did the member ensure that the SPFR and the audit report clearly state: (a) that it is a special purpose financial report; (b) the specific purpose for which the special purpose financial report has been prepared; and (c) the extent to which Accounting Standards and Interpretations have, or have not, been adopted in its preparation and presentation. (Pronouncement 3) 10. COMMUNICATION WITH CLIENT AND OTHERS 10.1 Did the auditor report identified SIS breaches within required timeframes: • to trustees (all breaches) • to ATO (all breaches in fund’s first year) • to ATO (all breaches that may affect the interests of members or beneficiaries (SIS s.129) • to ATO (all significant breaches of sections on which the auditor is required to form an opinion) (ASA 260.5, 260.15, 260.22) 10.2 Is there an end date recorded on any Auditor/Actuary Contravention Report notifying a breach, or is there a later report identifying that date? Has the auditor recorded sufficient evidence to confirm the rectification or cessation of the breach? 10.3 Is there evidence that the auditor has communicated as soon as practicable, material weaknesses in internal control and other relevant matters to the trustees? (ASA 240.106, 260.5, 315.141) 10.4 If the auditor has identified a fraud, or information that one may exist, has the auditor documented this in communications to trustees as soon as practicable, (ASA 240.99, 240.118), or if it involves trustees, to the ATO? (ASA 240.101, SIS s129). 10.5 If the communications with the trustees were made orally, was this appropriate for the nature of the communication and has the auditor kept minutes or file notes to record the communication? (ASA 260.26) 10.6 If the auditor has concerns that a written report may not reach all intended recipients (eg some fund trustees), has the auditor implemented an approach to make all relevant persons informed of the contents of the report? (ASA 260.28) 10.7 Has the auditor considered whether to communicate again on matters of governance interest previously communicated? (ASA 260.32) Have matters previously reported but not corrected been considered in the audit plan? 10.8 If the auditor has withdrawn from an engagement, has the auditor responded to an ethical enquiry from a proposed superceding auditor? If the client has denied permission for the auditor to discuss its affairs with the proposed auditor, has the auditor disclosed that fact? (ASA 250.56, 250.58) Review of SMSF Audit Engagements April 2007 Page 9 of 11 /home/pptfactory/temp/20100513121829/audit-smsf-checklist3119.doc
  10. 10. Reviewer's Comments Document/Records Seen File 1 File 2 File 3 File 4 File 5 File 6 11. REVIEWER’S ASSESSMENT 11.1 Does the auditor appear to have applied all essential procedures required by auditing standards (eg where the standard states “The auditor ordinarily …”)? If there are rare and exceptional circumstances that prevent this, has the member performed alternative appropriate procedures and / or documented the circumstances? (ASA 200.15, 230.23) 11.2 Do the financial statement and compliance audit opinions appear to have been based on sufficient appropriate audit evidence? Review of SMSF Audit Engagements April 2007 Page 10 of 11 /home/pptfactory/temp/20100513121829/audit-smsf-checklist3119.doc
  11. 11. The Reviewer should now complete the following sections and discuss them with the Member(s) before leaving. (Include here also the outcomes of the review of the Self-Evaluation Checklist unless you have already included them on another checklist, eg tax, management consulting, compilation) Outcomes: Positive feedback: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ Non-compliances with mandatory requirements identified: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ Minor deficiencies and suggestions for improvement: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ To be completed by the Member at the conclusion of the review Member(s) comments: The above statements are a true and fair description of the review outcomes ________________________________ (Signature) __________________ (Date) OR I disagree with one or more of the above statements, because:___________________________ ________________________________________________________________________________ ________________________________________________________________________________ The Reviewer should now complete the Review Report (FP 452 B) and supply copies to the National Education Manager within 2 weeks of the date of the review. Review of SMSF Audit Engagements April 2007 Page 11 of 11 /home/pptfactory/temp/20100513121829/audit-smsf-checklist3119.doc

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