WHAT YOU NEED TO KNOW

At times we receive queries from our clients asking why certain documents must be signed and by whom they must be signed. Other times we may receive partly completed documents which delay our auditor’s report being released. We believe it is time to highlight the importance of a fund maintaining complete documentation and state our position on documents.

OUR POSITION ON SIGNED DOCUMENTS

As a CPA Practice, we adopt a best practice approach to our audits as it is in the best interest of all parties (i.e., us, you (our client), and, more importantly, your SMSF client). Regarding signing documents, we believe the best practice is that all necessary documents are signed before the release of our auditor’s report. From our point of view, an unsigned document leaves the reviewer unable to confirm that the trustee has agreed to or approved the funds’ action. Should a dispute later arise between the trustees upon divorce or the potential beneficiaries following the death of a member, a fund’s records may be called upon for review. The failure to maintain complete records may make this time even more complex and may ultimately alter the deceased member’s wishes.

KEY AUDIT DOCUMENTS REQUIRING SIGNATURES

ANNUAL FINANCIAL STATEMENTS

An SMSF trustee must comply with section 35B (3) of the Superannuation Industry (Supervision) Act 1993 (SISA), which states:

The accounts and statements prepared must be signed as follows:
If there is a corporate trustee – by:
For a sole director corporate trustee – by that director; or
For multi-director trustees – by at least two directors of the corporate trustee; or
If there is a group of individual trustees – by at least 2 of the trustees.
Section 35B of the SISA is the section we are required to report on, and we will review the financial statements to ensure they have been signed in accordance with the legislation.

ATO NEW TRUSTEE DECLARATION

Under section 104A of the SISA, this declaration must be signed by all new trustees within 21 days of their appointment. The fund must maintain this signed record for at least ten years. As auditors, we must audit trustees’ compliance with this section of SISA. Therefore, we will require this signed declaration in the first year of a fund’s audit and subsequent years if a new individual trustee or director of the corporate trustee is appointed.

ENGAGEMENT LETTER

The engagement letter documents the agreement between the trustees and the auditor on the terms of the engagement. This includes the confirmation of the scope of the audit and the roles and responsibilities of each party. The signature from each side of the arrangement shows that both parties acknowledge and understand the terms.

Our position is that one of the individual trustees or one of the directors of the corporate trustee can sign this letter on behalf of the other trustees. However, the trustees should maintain minutes authorising that person to do so. Additionally, the requirements of the corporate trustee’s constitution should be considered to ensure a single director has the authority to do this on behalf of the corporate trustee.

INCOME STREAM COMMENCEMENT MINUTES

When an income stream commences, documentation should be signed and retained, confirming the terms of the income stream being paid to the member. The fund can be taxed more favourably if the income stream is paid in accordance with SISA rules; It is in the trustees’ best interest to maintain complete records showing the establishment of an income stream.

The signed commencement minutes confirm to us as auditors that the income stream was formally commenced, and the fund is entitled to claim the income earned on pension assets as exempt.
You should also review the Trust Deed clauses dealing with income streams.

NOTICE OF INTENT TO CLAIM PERSONAL CONTRIBUTIONS AS TAX-DEDUCTIBLE
(notices under section 290-170 of the ITAA 1997)

This notice confirms the member’s intention to claim a contribution as a deduction in their individual tax return. Without this signed notice, we, as auditors, cannot verify that the fund should be classifying the contribution as a concessional member contribution, making it essential for the audit. We also protect the member’s contribution’s deductibility by insisting on this document for our audits.

TRUST DEED

A trust deed formally documents the existence of a trust arrangement between a fund trustee and its members and then outlines the particular rules of that trust arrangement. Without a properly executed copy of the trust deed, there may be some confusion about what rules apply to the trust arrangement. It is important that the trust deed is properly executed and maintained by the trustees and that a copy of the executed trust deed is provided to us auditors for retention in our permanent record section of the audit file.

TRUSTEE REPRESENTATION LETTER

The importance of this document for the audit is that some aspects of the audit are difficult or impractical to test. As auditors, we rely on these representations from the trustees. Our position is that each trustee or each director of the corporate trustee must provide personal representation to the auditor by signing the letter.

CONCLUSION

Although at times our requests may appear trivial, in that they unnecessarily hold up the issuing of our Auditors Report, our instance on all audit documents provided to us be correctly executed is to ensure that the affairs of the fund being audited are in order reducing the risk for us, you (our client), and more importantly YOUR SMSF CLIENT.

This is also an opportune time to remind you of the availability of the prefilled compliance letter templates for funds loaded in our Audit Dashboard, saving you time and simplifying compliance.

As always, we encourage you to contact the team at ROSATI WANG Super with any queries or comments you may have regarding this or any other SMSF audit issue.