SMSF Auditor's Obligations Quiz

Which option below most correctly describes an SMSF auditor's obligations with respect to the auditing standards?

• The auditor must have an understanding of the entire text of each relevant standard.

• The auditor must exercise professional judgement and maintain professional scepticism throughout both planning and performing the engagement.

• Explanatory paragraphs provide support for the auditor in obtaining reasonable assurance.

• All of the above.

According to GS 009 assertions in relation to the statement of financial position are?

• Occurrence, completeness, accuracy, cut-off, classification, and presentation.

• Disclosure, recognition, and measurement.

• The significance of a misstatement to the SMSF.

• Existence, ownership, completeness, accuracy, classification, and presentation.

Which statement is correct in relation to the investment strategy?

• The investment strategy must reflect current investments and cannot consider future investments.

• The trustees should update their investment strategy each year.

• The trustees must document an investment strategy upon establishment of the fund and ensure the strategy is kept up-to-date.

• There is no requirement for trustees to cover insurance considerations in the investment strategy if the members do not require insurance.

Your client has purchased an antique car which is stored at his business premises. The car is insured in the name of the fund. Your client takes the car for a drive once a month. He mentioned this is required to keep the engine working. The car is not leased to anyone and your client notes he believes it will be worth twice its current value in 10 years’ time. Which statement is correct?

• The car cannot be stored at his business premises and cannot be used by a related party.

• The collectable rules only prohibit storage at a private residence and the usage of the car by the client is incidental and necessary.

• The car cannot be stored at his business premises.

• The car cannot be used by a related party.

Which of the items below would generally be sufficient evidence to confirm the market value of a loan asset?

• Evidence of repayment of the loan in full post year-end.

• Evidence of valuation and existence of the net assets of the borrower.

• Declaration by the borrower assessing recoverability.

• A copy of the loan agreement.

You are auditing an SMSF that has acquired a forklift from a business owned by the trustees. The business rents out machinery to large construction companies. The trustees have provided evidence the forklift was acquired by the fund at market value. Select the correct statement?

• This would not be a breach of S66 as a forklift falls within the definition of business real property.

• This would not be a breach of S66 as a forklift falls within the definition of business assets.

• This would be a breach of S66 which prohibits acquisitions from related parties.

• This would be a breach of S66 and the sole purpose test.

The trustees of an SMSF would like to purchase a serviced apartment under a limited recourse borrowing arrangement (LRBA). The apartment will be used for short-term residential accommodation . The purchaser of the apartment is required by the vendor to also purchase a furnishing package.

Would the apartment and furnishing package be considered a single acquirable asset?

• Yes, as the vendor requires that the purchaser acquires both the property and the furnishing package, the asset would be considered a single acquirable asset.

• No, if the trustees purchase both the apartment and furniture package under one LRBA, this will not comply with the single acquirable asset rules.

• No, because the furnishing package would be delivered at a later stage and therefore represents a separate acquisition.

• Yes, provided the contract of sale includes both the apartment and the furnishing package.

Your client owns a farming property that includes a residential home in which they live. Select the correct answer:

• The farming land may be transferred into the SMSF, but the residential home cannot be as this is not considered business real property.

• Provided the property meets the business real property definition, it can be sold to the SMSF at market value; however, it cannot be transferred into the fund as a member contribution.

• If the property is used as a primary production business and the residential area covers no more than 2 hectares it would still be considered business real property.

• The property can only be transferred into the SMSF provided the land is held on one single title.

Jack & Jill Smith are trustees of the Smith Family Super Fund. They also have a family trust. They have sold listed shares held by the family trust to the SMSF. The shares are included in the SMSF financials. You note the holding statement shows the owner of the shares as 'Sticky Pty Ltd ATF the Smith Family Trust'. You raise the issue with the trustee. They say it’s too much hassle to update the legal title of the shares. They have executed a trustee resolution noting the shares are held by the SMSF. What should you do?

• You advise the trustees you have insufficient evidence to confirm fund ownership of the investment.

• You report a breach as an SMSF cannot acquire assets from a related party and the title of the shares is incorrect.

• You refuse to complete the audit until the financials are amended and the shares are no longer included in the SMSF financials.

• As the SMSF trustees have documented the correct ownership, there is no reason for you to take further action.

Your client’s SMSF owns 5 bars of silver which are stored in a safe in their residential home. Will you need to qualify the audit as a result?

• No, provided the trustees have documented their decision in relation to storage.

• No, because the silver bars are not considered a collectable or personal use item, this means the silver bars may be stored at their private residence.

• Yes, because the trustees have breached the sole purpose test.

• Yes, because it appears the trustees have not complied with all requirements in relation to collectable and personal use assets.