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Latest enhancement to Online SMSF Audit tool for auditors

Any self managed super fund audit program can be considered "great" only if it is current and provides auditors up to date working papers as and when the superannuation law changes.

ATO has issued a new determination on 28th September 2016, TD 2016/16, where a related party lends to a SMSF under LRBA on terms which are not at arm's length. An auditor has to consider if this income is ordinary income or non-arm's length income (NALI) under Section 295-550(1).

We have added new checklist questions to the working papers to ensure that the SMSF auditor is making adequate checks to comply with the new ATO determination and have made the below enhancements to our online audit software:

1) Added new checklist questions in our working papers (questions in Tab B) to separate NALI from other income in light of TD 2016/16;

2) Expanded working papers checklist for those funds which are being wound up in the year of audit;

3) Upgraded our Dividend and closing 30th June prices for ASX listed assets to show discrepancies automatically from trial balance;

4) Enhanced trial balance capability on Tab B to provide totals and be exported to an excel sheet;

5) Added a functionality to import funds from BGL 360 instead of adding a fund manually.

Below are the enhancements in detail to the online audit software.

1) Added new Checklist Questions

We have extended our income questions in Tab B to fully cover all possible scenarios and separate all types of income which an SMSF can earn. These new questions are primarily to ensure that all types of income of an SMSF are taxed correctly and any special income or non-arm's length income (NALI) is correctly segregated. More questions on NALI are being written to include distribution income from related trusts and special dividend income from related companies.

These new questions are added in Tab B and if selected "Yes" by the auditor will pick further checklist questions in our working papers. All possible answers to these questions which will be inserted in the audit working papers for internal notes, management letter, audit report and contravention report are also provided with evidence checking in working papers from Tab C to Tab G.

a) We have added one more subcategory under question 7 for other assets.

7.6 Does the SMSF have any other assets?

If selected "Yes" a new question in Tab C - Balance Sheet will appear

The asset is held in the name of the trustee(s) of the SMSF in trust for the SMSF?

This is in line with inspecting audit evidence as per ASA 500 to confirm audit assertions as per ASA 315, compliance engagement as per ASAE 3100 and SIS requirements as per S.52B(2)(d) of the SISA and r.4.09A of the SISR

b) We have broken down income question in 5 parts - so that trial balance figures can be inserted for each type of income and tax on each type of income cab be correctly calculated. Any non-arms length income (NALI) is correctly identified and working papers are collated for appropriate type of income, Question 16 is now changed, see below for more details

Question 16:  Has the SMSF received any income?

 - if this question is answered "Yes" it gives 5 options:

16.1 Interest Income

If selected "Yes" 2 questions will be raised in the working papers in Tab D "Operating Statement Income"

i) Ensured, that all the interest included in assessable income in the annual return has actually been received, by vouching the total amounts recorded for each interest bearing investment to the relevant tax or annual statement issued by the institution for the year ended?

This is in line with inspecting audit evidence as per ASA 500 to confirm audit assertions as per ASA 315, compliance engagement as per ASAE 3100 and SIS requirements ofS.52B(2)(d) of the SISA and r.4.09A of the SISR as per ASA 250.

ii) The rate of return on total deposits is reasonable and reflects market rate of return?

This is in line with inspecting audit evidence as per ASA 500 to confirm audit assertions as per ASA 315.

16.2 Dividend Income

If selected "Yes" you will be able to activate the dividends checking table for the fund where all ASX listed share dividend income has been stored.

This table has been modified, earlier it was a pop up screen, but now we have a separate page for this table. You will notice that you are now able to add trial balance figures in the table. A new column has been added "Discrepancy" which will give you any discrepancies between the income declared in the trial balance and the actual dividend paid by the company. If you roll over the dividend table from previous year and enter current year trial balance figures, the system will automatically give you a discrepancy report. In one of our trials, this feature saved an auditor about 45 minutes for a fund which had 30 shares and selective testing of 10 shares was checked on selective basis.

Tab D Operating Statement we have added 5 relevant questions in the working papers

i) All dividends are supported by a statement and all statements are in the correct name of the fund?

This is in line with inspecting audit evidence as per ASA 500 to confirm audit assertions as per ASA 315, compliance engagement as per ASAE 3100 and SIS requirements of S.52B(2)(d) of the SISA and r.4.09A of the SISR as per ASA 250.

ii) All applicable franking credits and any withholdings have been recorded correctly and confirmed this by vouching the amount of franking credits recorded with the relevant dividend statement or recalculating the franking credits with reference to the registry. Franking credits can be calculated by amount of dividend received * % franked * 3/7.

This is in line with inspecting audit evidence as per ASA 500 to confirm audit assertions as per ASA 315

iii) Fund has received or accounted for all dividend income that the fund was entitled to, in the year of audit and confirmed dividend receipts with an external source such as www.asx.com.au or www.tradingroom.com.au ?

iv) Verified that all investments for which no dividend has been received, either paid no dividends during the year of audit or at the ex dividend date the fund was not a shareholder (reviewed investment holdings and determined expected income streams)?

v) Ensured that dividend stripping rules have not been breached ( to receive a credit for imputation credits, the share must be held for at least 45 days)?

In Tab E Income Tax, 3 relevant questions are added in the working papers

i) Interest, dividend and any other income reported in the tax return reconciles with the operating statements?

This is in line with inspecting audit evidence as per ASA 500 to confirm audit assertions as per ASA 315 and Income tax requirements of s.295-320 of the ITAA 1997 as per ASA 250.

ii) Franking credits from dividends have been included and are correct with reference to the audited detailed investment income report?

iii) The franking credits have been applied against tax and the amount reconciles with the amount recorded in assessable income section of the tax return?

16.3 Trust Distribution

If selected "Yes" then 4 questions get added in Tab D Operating Statement in the working papers

i) All distribution income received and recorded are attributed to the investments in managed funds as held by the fund?

This is in line with inspecting audit evidence as per ASA 500 to confirm audit assertions as per ASA 315, compliance engagement as per ASAE 3100 and SIS requirements of S.52B(2)(d) of the SISA and r.4.09A of the SISR as per ASA 250.

ii) All the distribution income the fund is entitled to, for all managed funds and unit trust have been accounted for by the SMSF?

This is in line with inspecting audit evidence as per ASA 500 to confirm audit assertions as per ASA 315

iii) Where the fund accounts on accrual basis, have all distributions that the fund is entitled to but not received been accrued?

iv) Have you ensured the various component of the distribution has been recorded correctly and taxable income has been calculated correctly by computing taxable income from the relevant tax statement?

16.4  Rental income from real property

If selected "Yes" then 5 questions get added in Tab D Operating Statement in the working papers

i) Rent received is for the year of audit and all rent pertaining to the year of audit has been received and checked total amount with the annual rental statement issued by the Agent (or with rental agreement)?

This is in line with inspecting audit evidence as per ASA 500 to confirm audit assertions as per ASA 315.

ii) Where no rent has been received, an explanation has been sought from the trustees and a representation from the trustees received that the property has not been in use or leased to anyone?

This is in line with inspecting audit evidence as per ASA 500 to confirm audit assertions as per ASA 315, compliance engagement as per ASAE 3100 and SIS requirements of s.62 of the SISA as per ASA 250.

iii) Reviewed lease documents to ensure no residential property has been leased to a related party of the fund?

iv) Where there is difficulty in ascertaining whether a residential property has been leased to a related party of the fund, ensured that the trustees have signed a declaration confirming otherwise?

v) Reviewed the lease agreement to ensure terms are commercial under the prevailing economic conditions?

16.5 Any other income or non - arms length income

A new question has been added because of ATO new Tax Determination 2016/16 to ensure that ordinary or statutory income of a self-managed superannuation fund is not non-arm’s length income (NALI) under subsection 295-550(1) of the Income Tax Assessment Act 1997 (ITAA 1997) when the parties to a scheme have entered into a limited recourse borrowing arrangement on terms which are not at arm’s length

If selected "Yes" then 4 questions get added in Tab D Operating Statement in the working papers

i) Income is calculated correctly and disclosed correctly?

This is in line with inspecting audit evidence as per ASA 500 to confirm audit assertions as per ASA 315.

ii) Income has been vouched to the relevant supporting statement or document?

This is in line with inspecting audit evidence as per ASA 500 to confirm audit assertions as per ASA 315, compliance engagement as per ASAE 3100 and SIS requirements of S.52B(2)(d) of the SISA and r.4.09A of the SISR as per ASA 250.

iii) Income earned is on arm’s length?

This is in line with compliance engagement as per ASAE 3000 and SIS requirements of s.109 of the SISA as per ASA 250.

iv) Income is classified correctly between investment and other income?

Question 29 Does the fund pay any tax?

If selected "Yes", in Tab E Income Tax - 8 questions related to calculations of tax are raised in the working papers.

Further enhancement in this area: We are also designing an automated tax calculator. If correct figures of income is declared in trial balance, the online system will work out the tax for the year, this way the machine will verify if correct tax has been entered in the accounts without the auditor doing any sort of calculations. This new tax calculator will assume all franking credits and TFN tax has been correctly entered by the auditor.

Question 30 Does the fund have members?

This question is only for trial balance purposes for entering opening / closing balance to tally the trial balance.

Further enhancement in this area: We are designing a new contributions table and a pension table in Tab F - Member statement where the auditor will be able to follow the various contributions in previous years (from day 1 including rollovers) and track taxable and tax free components of each member. This will be helpful when the fund is paying a death benefit lump sum or a pension to a beneficiary of the member.

2) Expanded working papers for funds which are being wound up in the year of audit

Question 31 Is the fund being wound up during this financial year?

This question has been inserted on request by an SMSF auditor who was auditing a fund which was being wound up during the year of audit. If you see our working papers weak in audit of any particular situation and need improvement, do not hesitate to contact us.

We earlier did not cover this area of audit in our working papers. If selected "Yes" 4 new questions have been added in Tab F - Member Statement. For the benefit of other auditors, who are not using our system yet, we are also reproducing working papers and what an auditor needs to check, when a fund is wound up during the audit year.

Question 1. Have the trustees taken all the steps to wind up the fund correctly?

This is in line with inspecting audit evidence as per ASA 500 to confirm audit assertions as per ASA 315, compliance engagement as per ASAE 3100 and SIS requirement of s.55 of the SISA as per ASA 250.

Answer 1. Confirmed that the funds trust deed provides for winding up of the fund. Confirmed that

1. All the liabilities of the fund are paid including administration costs, supervisory levy and audit fees
2. All the members balances are rolled out correctly or benefits paid to the members
3. Tax return is lodged and income tax and any GST liability is paid
4. The tax return was correctly notified that it is the funds last year return with date of winding up
5. Letter was sent to ATO within 28 days intimating wind up of fund request cancelling of ABN, TFN etc of the fund
6. All bank account were closed
7. Confirmed letter received from Australian Business Register that the ABN has been cancelled

Question 2. At the time of winding up, have all member balances been rolled out to a complying fund from the Super fund ?

You need to make sure that: members benefits has been dealt according to the super law and the trust deed and the fund has no assets left once it has been wound up.

Answer 2. Confirmed that upon winding-up, all the member balances were rolled out to a complying fund 

1. Liquidated investments – checked all the investments were sold and cheque paid to a complying fund
2. Checked the assets of the fund were transferred in-specie to the receiving fund at market value
3. Checked the rollover  form to test whether they were paid to and received by a complying superannuation fund.

Question 3. At the time of winding up, was any member balance paid to a member?

You need to make sure that: members benefits has been dealt according to the super law and the trust deed and the fund has no assets left once it has been wound up.

Answer 3. Checked that market valuation of all assets was done at the date of windup and income credited to all members and benefit paid to the correct individual member.

Also checked

1. Member had met condition of release at the time of payment on request of the member
2. Cash – ensured there are no transactions post wind up date for the member and member balance was nil at winding up date
3. Checked if in-specie payment was made to any member, independent valuation of assets was conducted and the member liability was extinguished with market value of assets and cash.
4. Checked PAYG withholding payment summary has the correct withholding tax in case of lump sum withholding tax requirements
5. Checked that withholding tax was paid to the ATO

Question 4. Have trustees received advice from an advisor to wind up the super fund?

Answer 4. Checked that advice was received from an advisor to wind up the fund. The trustees have decided in a meeting as per the trust deed to wind up the fund due to the following reason

1. Trustees circumstance have changed in a way which has affected their capacity to effectively manage the fund
2. All the members and trustees have left the SMSF
3. The fund has paid the members all of their benefits
4. one or more of the SMSF member have relocated overseas and the fund is no longer a "resident regulated superannuation fund"
5. There is an insufficient balance of the funds in the SMSF to meet the ongoing costs of operating the fund
6. There has been a breakdown in relationship between one or more members of the fund and has affected the ability of members to effectively undertake their trustee obligations.

3) Upgraded our Dividend and closing 30th June prices for ASX listed assets to show discrepancies automatically from trial balance

When question 3 of Tab B - Formulate an audit plan is ticked "Yes", the fund auditor is offered (icon on trial balance section) a table to add shares which are held by the fund as on 30th June of the financial year of audit. When this icon is clicked, it takes you to a separate page (earlier a pop up window). On this page the auditor now has two version of the table

Short version: Compare market price of ASX listed securities with trial balance figures for 30th June 20XX - this table will give you a complete discrepancy report.

Full version: All features of short version, plus, if you enter purchase date and price, you can also obtain change in market value of ASX listed securities. If the security is sold during the year and if you enter sale price and date of sale, the table will calculate capital gain and discounted capital gain. This table will give allow the auditor to do the following checks:-

i) Discrepancy report from set of accounts to ASX 30th June prices;

ii) Change in Market Value from cost price to Market Value as on 30th June of the audit year;

iii) If the share is sold then will provide you Capital Gain and discounted capital gain if the share was held for more than one year.

When you roll over from year 1 to year 2, to perform next year's audit, all figures in purchase price will stay intact for the following years audit and will provide new market value of all shares not yet sold for the following year automatically.

Further, when we complete BGL 360 import of trial balance this table will be pre - populated by all ASX holdings from the trial balance imported. The machine will then produce a discrepancy report in seconds. In our trial the import function took about 1 minute and the auditor of a fund with 30 shares took about 1 hour and 15 minutes to check closing share prices and calculating CGT (some discounted) for 10 shares and to check change in market value.

4) Enhanced trial balance capability on Tab B to provide total and be exported to an excel sheet

At the bottom of Tab B we have placed total figures of for all the debits and credits of the trial balance so that the auditor can be confident that all the figures have been entered correctly. Please note that any credit figure must be entered with a minus (-) sign in front of the figure. These trial balance figures can be exported in an excel format on clicking "TB" icon on the top icon panel.

We are working on importing trial balance from desktop software's such as BGL simple fund & Handi Soft Super. Once integrated, you will be able to set up funds and import trial balance from csv files exported from these softwares.

5) Added a functionality to import funds from BGL 360 instead of adding a fund manually

Instructions on how Funds data can be imported to www.onlinesmsfaudit.com.au from BGL 360

Import SMSF set up data by an Audit Partner

Log in and click on  from Audit Manager page

Steps to import funds from BGL 360

To import SMSF's set up data from BGL 360, you have to be provided an access code by the accountant / administrator of the SMSF's who has been added as a client under "My Details".

1. Select the accountant from the drop down list.
2. Click on ‘Import’ icon, you will be directed to a pop window to enter access code provided by your client and Authorise.
3. You will get a list of funds available to import. Please select fund(s) that you are willing to import.
4. Click on Import button to import the selected funds. Next page, you will be presented with:
   • List of funds imported successfully.
   • List of funds not imported due to some error.

Import SMSF set up data by an Accountant

Log in and click on  from Document Manager page

Steps to import funds from BGL 360

1. Click on 'Import' icon, you will be directed to BGL 360 login page.
2. You need to input BGL username and password and log in to BGL.
3. You will be redirected to 'Please choose a firm' page where you have to select a firm from the drop-down list.
4. The count displays the total number of funds available for the given firm. Please click on 'Select Fund' for changing the accessible funds.
   • If you select YES for Auto Enable Funds, access will be given to all current and future funds by default to this auditor.
   • Selecting NO will make all the funds, including future funds, inaccessible by default.
   • You can also individually enable or disable funds from the list by clicking on the arrow that displays when you hover your mouse over a fund.
   • The page will then display the list of enabled funds and disabled funds under separate heading.
   • Once you have selected the funds to enable or disable, select 'Authorise' to return to the 'Authorisation/ Denial Page'.
5. The window will be updated to reflect the enabled funds the user has selected in fund selection section. You can Authorise if you are happy with the accessible fund count.
6. You will get a list of funds available to import. Please select fund name you are willing to import.
7. Click on Import button to import the selected funds. Next page, you will be presented with:
   • List of funds imported successfully.
   • List of funds not imported due to some error.
8. Click on 'Back to Doc Manager' icon and you will notice that the wizard has added set up fund data on 'Document manager' page.

Increase in Price

At current prices, we simply cannot afford to fund development of the website further without increase in prices.

We want to increase price by approximately $2 - $4 per audit from 1st January 2017. This means it will cost $17 per fund Plus GST instead of current $15 + GST. An audit pack for 100 funds will become $15 instead of current $12 and so on.

Our audit packs never expire from one audit year to next year, this means that if you buy an audit pack before 31st December 2016, it will last you beyond 2016 year audit or in other words if you audit say a 100 funds in a year and if you purchase 300 fund audit pack before 31st December 2016, it will last you for the current year and another two years.

Our new prices will be uploaded on the server once finalized, we will give every audit firm at least a months notice and three warnings to purchase audit packs before prices will go up on 1st January 2017, however if your audit pack is about to exhaust, you should consider buying for the whole year (or more) at current prices. Those whose audit packs have not exhausted by 31st December 2016 can also purchase before the audit pack exhausts.