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WorksheetsSMSF Auditor's Obligations Quiz
Total questions: 35
Worksheet time: 24mins
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.
Your client's SMSF has provided a loan to a related party of $100,000, which represents 3% of the fund's assets at 30 June. The loan is provided to the brother of one of the trustees. He is a sole trader and operates a surf school. He has used the money to buy equipment and a van. All aspects of the loan are on commercial terms.
Select the correct statement in relation to the fund’s compliance with section 65 - financial assistance and the inhouse assets rules.
The loan would be considered an inhouse asset. There is no breach of S65 as the loan is used for business purposes.
The trustees have breached S65.
The trustees have breached both S65 and the inhouse asset rules.
The loan would be considered an inhouse asset, as a result there is no breach of S65.
Where the prior year audit has been completed by another auditor, the new auditor:
Must always qualify the opening balances.
Must always include a modified opinion in the audit report.
Is required to review the prior year audit report and can rely on the conclusions reached in the report.
Needs to perform audit procedures to verify the opening balances do not contain material misstatements.
One of your clients held 1,000 listed shares personally and transferred them into their SMSF on the 1st of September. The market value on the signed and dated off-market transfer form shows as 1,000 x $20 or $20,000. You notice the market value on the 1st of September was $45 per share. At what value should the contribution be recorded?
$45,000
$20,000
You need to check on which date the share registry processed the transfer. The value would be the closing price on that date.
It is no longer possible to transfer shares from a related party into an SMSF.
Select the correct answer concerning cash at bank investments:
A copy of all bank transactions provided in CSV or Excel format can be used as evidence to support transactions and 30 June balances, provided they are issued directly to the auditor by the accountant.
Where bank transactions are updated via data feed, bank statements are not required and the SMSF auditor may rely on the data feed to confirm the year-end balance.
Where no data feed is in place, the auditor should ensure they obtain at least a majority of the bank statements for the financial year.
Where no data feed is in place, the auditor should ensure they obtain the bank statements for the full financial year.
Some high-risk areas concerning the SMSF audit include:
The risk of fraud.
Related party transactions.
Contraventions of the SIS Act and SIS Regulations.
All of the above.
Select the correct answer:
It is rare for an SMSF auditor to obtain external confirmations as part of the audit process.
An external confirmation is requested from a third party by the trustees.
For cash at bank investments, auditors should generally obtain a bank confirmation.
Obtaining confirmation of the number of shares held via the share registry is a form of external confirmation.
Frankie is 50 years old and has made multiple non-concessional contributions totaling $220,000 during the 2023 financial year. His draft total super balance at 30 June of the prior financial year was $1.49 million. The financial statements have now been finalised and due to a revaluation of assets, his 30 June member balance was revised to $1.59 million . As a result, his non-concessional cap available for the 2023 financial year is only $110,000, not $220,000.
The last contribution of $110,000 was made 3 months ago. Frankie withdraws the money and provides you with a trustee resolution noting the fund was not able to accept the contribution and was therefore refunded.
The $110,000 withdrawal would be considered a member benefit payment and breach of the benefit payment standards if no condition of release has been met.
The member will be receiving an excess contribution notice, which will act as supporting evidence for the $110,000 payment being returned to the member.
The $110,000 could be returned because the amount was over the member’s fund capped contribution limit.
Because limited time has gone by, it is acceptable to report the receipt of the $110,000 and subsequent return as a payment by error.
A trustee may be remunerated for their services to the SMSF without breaching SISA section 17A in which of the following situations?
A trustee who is a qualified accountant, for preparing the SMSF financials at a 50% discount.
A trustee who is a licenced builder, who provides labour and supplies materials for replacing the roof on the fund’s investment property.
Options A and B.
None of the above.
You are in the process of completing the audit for an SMSF and have been liaising with Steve Smith who is the fund’s sole member and trustee director. Steve’s brother Todd gets in touch with you noting Steve has been badly injured in a motorcycle accident and is suffering acute short term memory loss. Todd has provided a resolution confirming that Steve has lost mental capacity and that Todd is acting in his place as director of the fund’s corporate trustee. Select the most correct option:
The auditor should request medical confirmation of Steve’s mental incapacity.
The auditor should request the current ASIC statement for the fund’s corporate trustee.
Todd can only act as trustee on behalf of his brother if he is Steve’s legal personal representative and the trust deed allows the appointment.
All of the above.
Your client’s employer made a superannuation guarantee payment of $5,000 on the 29 June by electronic transfer. The deposit only shows up in the SMSF bank account on 1 July. The trustees have recorded the contribution on the 29th of June in the SMSF financials. As supporting evidence they have provided a copy of the bank statement from the employer supporting the payment was made on the 29th of June. They have also provided you with a payslip confirming the superannuation guarantee contribution relates to wages paid for the month of April. Select the correct answer:
Because the member can demonstrate the contribution relates to the contribution relates to wages paid during the April – June quarter, it should be reported on the 29th of June.
The contribution should be recorded on the date it is made by the employer and reported in the SMSF financials on 29th of June.
The trustees can apply a contribution reserving strategy.
The contribution should be reported in the SMSF financials on 1 July.
Select the correct statement:
Audit sampling involves the application of procedures to less than 100% of a population, in a manner that enables conclusions to be drawn in reference to the whole population.
Sampling risk is the risk that an auditor’s conclusions based on a sample will be different from the conclusion that would follow if the whole population has been examined.
Selective sampling is performed using judgmental selection according to certain characteristics and cannot be applied to form conclusions about the whole population.
All of the above.
In which of the below scenarios are the trustees required to obtain an actuary certificate?
Select one or more answers:
A fund paying a complying lifetime pension.
A fund using the unsegregated assets method with an accumulation
account and an account-based pension.
A fund using the segregated assets method with an accumulation
account and an account-based pension.
All of the above
The SIS Act requires which of the following documents to be signed either by all, or a minimum of two SMSF trustees or corporate trustee directors?
The trustee representation letter
The financial statements
The investment strategy
The engagement letter
The following audit assertions need to be considered in relation to rental income received for a residential property:
Occurrence, completeness, accuracy, cut-off, classification
Existence, completeness, presentation, disclosure and valuation
Existence, completeness, valuation and allocation, rights and obligations
Occurrence, completeness, classification, accuracy, rights and obligations
What is a common part A qualification?
SMSF assets are not being held in the correct title.
Related party investments are not being maintained on an arms-length basis.
Insufficient evidence to support market value.
All of the above
The fund you are auditing has two members and changed from an individual trustee structure to a corporate trustee structure during the year. You review the SMSF trust deed which has only one clause covering the removal and appointment of trustees which states: "The appointment, removal or replacement of a Trustee shall be by written agreement by a majority of the members or by unanimous agreement where the fund has two members". The trustees have provided a "Deed of retirement and appointment of trustee" to support the change of trustee. This document is signed by the old and new trustees but does not refer to the fund members. Select the correct answer.
The trustees can document the change of trustee in any matter they consider appropriate, provided it is in writing.
It is not the auditor’s responsibility to review legal documentation prepared for the fund.
Provided the deed has been signed and dated by the retiring individual trustees and the new trustee directors, it is adequate to document the change of trustee.
You should request additional documentation confirming the members of the fund have agreed to the removal of the old trustee and appointment of the new trustee.
The fund you are completing the 2023 audit for has an investment in a pre-1999 unit trust and there is an unpaid distribution from June 2021. What is the position regarding the distribution receivable?
As the receivable has been outstanding for more than a year, the amount is a loan and therefore an in-house asset
There is no requirement to audit the distribution receivable.
A distribution receivable from 2021 is not a loan.
Provided that the receivable is paid by 30 June 2023 there is no breach of the SIS Act.
For what period of time are trustees required to maintain trustee minutes under the SIS Act?
5 years
7 years
10 years
Indefinitely
Auditing Standard ASA210 prescribes matters in relation to the engagement letter. Who should the engagement letter be addressed to?
The members
The administrator
The trustees
Both the trustee and administrator
If a member aged 75 commenced an account-based pension on 1 June 2023, what is the minimum pension requirement?
3% of the account balance on 1 June 2023 x 30/365.
No minimum or maximum payment is required.
6% of the account balance on 1 June 2023 x 1/12.
No minimum payment is required but a maximum of 10% applies.
Some high-risk areas concerning the SMSF audit include?
The risk of fraud.
Related party transactions.
Contraventions of the SIS Act and SIS Regulations.
All of the above.
While auditing an SMSF, you have identified an error in the recognition of distributions revenue. The error amounts to $5,260. You have determined that $15,000 is the materiality level for the audit of this SMSF. If the financial statements are not corrected in respect of this error, what are you required to do?
The amount is immaterial and therefore no further action is required.
Though the amount is immaterial, the financial statements should be adjusted. If the adjustment is not made, the audit opinion should be qualified.
The amount is immaterial and therefore no adjustment is required. However, the auditor must accumulate all misstatements identified, unless clearly trivial, and communicate all accumulated misstatements to the trustees.
Though the amount is immaterial, the auditor must communicate all identified misstatements to the trustees.
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.
Which of the following items is a collectable or personal use asset?
A forklift used in a factory and leased to a related party
A diamond ring
A race-horse
Gold bullion
You are auditing an SMSF with commercial property investment. The property comprises 70% of fund total assets as at 30th June in the year of audit. The trustee has undertaken to value the property themselves. They provide a minute, stating the value and confirming that the figure is based on comparable sales, analysis of rateable value, and rent capitalisation. Select the most appropriate response:
The evidence provided is insufficient. A real estate appraisal providing a value range is acceptable audit evidence, provide the agent states the methodology that has been used.
The evidence provided is insufficient. As the property comprises 70% of total assets, the ATO recommends that a qualified, independent valuation is obtained every year.
The evidence provided is insufficient. To be acceptable evidence, the trustee’s valuation must be supported by data, for example, a portfolio of comparable sales.
All of the above.
