How to audit an SMSF that has invested in Crypto Currency

As an SMSF auditor, auditing an SMSF with an investment in crypto currency makes me nervous. Somehow I have to force myself away from this sudden urge to lodge a contravention report and advice the ATO of trustee mischief and foolishness, as I personally think it is a bogus investment class (strangely, Mr Buffet agrees with me).

My personal opinion aside, crypto currency is a valid and an allowable SMSF asset and is not going to go away from trustee's mind, no matter how much I hate it.

In any case, fund auditors cannot dictate Trustees which investment classes a fund can or should invest in - irrespective of the fact that they are AFS licence holders.

If a fund Trustee decides to invest in Crypto, then that is their choice to do so, as long as all the requirements are complied with. At most all the auditor can do (in light of Bear and Cam case) is alert the Trustees on recoverability of the asset class in their management letter and off course go the extreme of resigning from the audit engagement before commencing the audit.

When I commenced my audit, my only pray was " God, let this fund be the first and last fund that I have to audit with investment in crypto" (my sixth sense however alerted me otherwise), as 2018 audit season had just begun and November 2017 was when Bit coin peaked and that was the time when every trustee and his dog was trying to set up crypto wallets accounts for FOMO reasons.

This fund was probably going to be the first of many to come with crypto as an asset class.

Finally wiping sweat of my brow, I got on the job, as I must audit what is in the financial statement based on audit evidence provided and focus on audit of compliance issues, to express my audit opinion. My main areas of concern were:

• Does the fund's trust deed and investment strategy allow for this type of investment?
• Can ownership and existence of crypto asset be confirmed?
• What is the market value of crypto at balance date and my audit report signing date?
• Is separation of assets and the sole purpose test achieved by the fund?

After investing a whole lot of time and effort and ensuring that I have not missed anything, I come up with the following:

- Declaration of trust which the Trustees and the person who owns the digital wallet must sign;

- Minutes of the meeting where investment is decided which the Trustees must sign;

- Valuation of digital currency notes; and

- notes in my management letter.

Click here to download my work - such as Declaration of Trust + Minutes of meeting + Valuation of Asset + Comment in Management letter.

To make your life easy, I am enclosing my work for you to use - those using www.onlinesmsfaudit.com.au, do not worry, all this information and additional checklist on answering "Yes" to the question "Does the SMSF own Crypto Currency?" will soon appear on Tab B with detail checklist on Balance Sheet Tab.

Those not using www.onlinemsfaudit.com.au - good luck and hope you can keep your auditing licence till another audit year, because I have not seen a crypto "How to audit" checklist on any other platform - remember, you are welcome to audit 5 funds for free when you join www.onlinesmsfaudit.com.au

SMSF auditor needs to consider audit plan and their audit strategy to ensure risks associated with crypto asset class is documented in the audit working papers and the audit has considered valuation of crpto asset in the financial statements and notes thereto.

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Our trust deed permits the trustee to invest in crypto currency, click here to learn how to update your SMSF trust deed for $125 Incl. GST..

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CPD Requirement for SMSF Auditors

SMSF Auditors: SIS Regulations 9A.04

(1)  For paragraph 128F(a) of the Act, the requirements in this regulation form the continuing professional development requirement.

             (2)  The approved SMSF auditor must undertake at least 120 hours of continuing professional development every 3 years.

             (3)  The development must:

                     (a)  include 30 hours of development about superannuation at least 8 hours of which is development about auditing of self managed superannuation funds; and

                     (b) : be development that could reasonably be expected to enhance an approved SMSF auditor's technical skills or professional service delivery.

Click here for 6 CPD hours for $165 for SMSF Auditors

This is what one of the attendees had to say about our presenstation: 

Thank you for inviting me to your seminar. I really learnt a lot of practical SMSF audit issues from you which I did not know before. I really liked your presentation style and the way that you conducted the technical seminar explaining things on the white board. I been to many seminars including NTAA SMSF School and SMSF workshops but your presentation was quite unique and much better as it was targeted at my level and I could understand complexities of the new SMSF law.

Thank you again for explaining a lot of difficult topics such as CGT relief, death benefits, ECPI etc in such an easy manger. You’re one of the best!

Ash Alam CPA, Registered Tax Agent 

Justice of the Peace & SMSF Auditor

Learn how to Audit in less than half time 

CPD Hours : 6 Hrs in SMSF & Audit - 2 Hrs in Superannuation & 4 Hours in Auditing SMSF's

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Australia’s first online SMSF Audit Software – Fully Automated Online SMSF Auditing Software

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Proposed Agenda

8. 30 - 9.00 AM  Registration - Arrival Tea and Coffee

09.00 AM Technical Session -  Audit of SMSF - Transfer Balance Cap | Contributions & Total Superannuation Balance | CGT Relief

11.00 AM  Tea/Coffee Break

11:30 AM  Introduction to Audit Online on SMSF Audit Software and Website integration

01:00 PM Lunch and Group Discussion on Audit of funds with LRBA - Loan from related party - how repayment of Loan will be considered  

02.00 PM  How to complete an audit in half the time

4.30 PM  Workshop Closed

Introduction/Overview

SMSF Auditors spend too much time in financial audit and completing manual audit working papers, our online software does most of this work automatically & saves half your time as compared to traditional auditing methods.

It checks closing share prices, dividends received from ASX and all mundane tasks of signing, scanning & mailing of audit report, Mgt. letter, engagement letter, Invoice & contravention reports etc. are automated with one click of a mouse. Embrace an efficient framework for high quality audits and conduct audits on a flawless workflow Management system.

Achieve peace of mind & confidence of knowing that you are using a completely up-to-date online checklist and cloud process to deliver a robust, hassle free top quality SMSF audit. Improve communication with accountants & trustees. Manage 20 or 2000 audits by streamlining workflow from our smart Audit Manager & establish seamless communication between all parties. Our online SMSF audit system is the only tool which can deliver reliability, speed and volume and ultimately profits for your business at a fraction of the cost.

Benefits/learning outcomes

Audit from anywhere, anytime from any device on your own website or by integrating with ours. Increase audit effectiveness, add value, reduce audit risk, drive SMSF compliance, revolutionise your business.

Included in the fee is an account to audit 10 SMSF on the online platform worth $187 and Lunch. Those auditors who are already using the online software will benefit by learning new shortcuts and other advanced features of the online software. 

Recommended For

All SMSF ASIC approved auditors.

Session Notes

CPD Hours

2 Hours CPD in Superannuaiton and 4 Hours CPD on auditing SMSF's Total 6 CPD hours under self assessment method under RG 243.88 - 90 and SISA 128Q and SISR 9.04

RG 243.89 You will need to complete 120 hours of CPD over each three-year period, which must include 30 hours of development on superannuation and at least 8 hours of development on auditing SMSFs.

SISR 9A.04 (3) (b)  be development that could reasonably be expected to enhance an approved SMSF auditor's technical skills or professional service delivery.

Attendee Requirements

Attendees may bring their own Laptops / Ipads for a better understanding - although some attendees may get more from the workshop by looking at the facilitators screen 

Speaker

Manoj Abichandani 

Manoj has worked in SMSF since 1988 and is SMSF Specialist (UNSW). He was providing high level advisory services to over 600 funds in his own 3 partner CPA tax practice for 19 years and has written this online software. He currently works as SMSF Technical Support Team Leader at www.trustdeed.com.au

He has hands on knowledge on what happens in a tax practice on high level of SMSF practical issues.