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Being an SMSF Auditor is a risky business!

Recently an auditor was found negligent and the courts (Ryan Wealth Holdings Pty Ltd Vs Baumgartner) fined him close to $2M where he charged an audit fee of $450!

 

Free Webinar

Couple of lines of warning to the Trustees of the fund could have saved the auditor - what are these lines? and how to protect yourself? specially how to protect your firm where the accounting work is also done by your firm (by another partner)?

I am presenting a free webinar where I will be discussing on what should SMSF Auditors should do to protect themselves.

 

Who should NOT attend this webinar

SMSF Auditor who knows the level of their liability to the SMSF Trustee between the three below investments scenarios of the same investment, need not attend this webinar.

Scenario

Trustee buys 20,000 Shares of AMP $5.96 on 8th August 2016 for $119,200 approx 50% of the fund value. On 30th June 2017 market value of AMP share was $5.19, you were the auditor of the fund and you have just issued the Audit report for 30th June 2018 where the market price was $3.56 on 30th June 2018 and the shares were $2.31 on 30th Oct 2018, the date of signing the audit report.

Since you audited 2017, the Trustee has lost $15,400 or 13% in that year and by 30th June 2018, Trustees lost 40% or $48,000 and on audit report singing date Trustees have lost $73,000 or 61% of the investment and they are considering suing you, the auditor of the fund, for not alerting them of possible loss in 2017 and 2018 audits.

During this period investment strategy of the fund which the Trustees agreed upon, claims that investments in listed shares will be no more than 10% of the fund balance, where as the fund invested 50% of total assets in purchasing only AMP shares.

Question: Are you, as the fund auditor, liable to the Trustees loss of investments in AMP shares, if the investment in AMP is

a) made directly by the fund

b) made via an unlisted Trust

c) made via an Advisors unrelated Custodian Company where the SMSF loaned money to the Company

 

Webinar Details:

Date : 12th November 2018

Time: 2:00 PM To 3:00 PM

How To Book: https://www.smsfaaa.com.au/Home/Webinar

CPD Hours : 1 Hour

Speaker: Manoj Abichandani

 

 

CPD Requirement for SMSF Auditors

T    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.

 


 

 

This Webinar is presented by SMSF Auditors Association of Australia Ltd

This webinar is organized by SMSF Auditors Association of Australia Ltd - a new body created to help SMSF Auditors to keep up their CPD hours. Membership to this association is $10 per month plus GST. Included in your membership is a free SMSF Auditors help line by focus members and Free 20 CPD hours by renowned SMSF experts.

 


 

The case of Cam & Bear Pty Ltd v McGoldrick citation: [2018] NSWCA 110

 

Background:

This case is about a negligent auditor who on appeal was awarded to pay 90% of loss of assets of the trustee of the fund. The appellant, Cam & Bear Pty Ltd, is the trustee of a self-managed superannuation fund (“the Fund”) established in about 1985 for the benefit of Dr Lance Bear and his wife, Ms Jennifer Campbell. At all material times, the trustee was Landav Pty Ltd, the directors of which were Dr Bear and MsCampbell. Mr John McGoldrick. The respondent, was an accountant who audited the accounts of the Fund, including for the financial years ended 30 June 2003 to 2007.

Appeal arose out of a claim for damages for negligence and misleading and deceptive conduct brought by Cam & Bear against Mr McGoldrick (SMSF Auditor) in the Common Law Division.

It was alleged that Mr McGoldrick had breached his duty of care and engaged in misleading and deceptive conduct:

1) by failing to qualify the audit reports as to the possibility that those assets described in the Fund’s financial statements as “cash” may not be recoverable, they being in fact unsecured loans to a company associated with Dr Bear’s friend, Mr Anthony Lewis who was the custodian of the fund's assets and owned 35% of the administration firm who engaged Mr McGoldrick to audit the fund; and,

2) by including in the audit reports a statement to the effect that the financial statements “presented fairly…the financial position of the Fund and the results of its operations and its cashflows”.

 

Initial Judgement

After a seven day hearing, Rothman J found that Mr McGoldrick had been negligent and engaged in misleading and deceptive conduct, but that his conduct had not caused any loss to the appellant: [2016] NSWSC 1894.

 

On appeal, the appellant argued:

(i) That when considering the issue of causation, the primary judge erred in failing to have regard to the breadth of the appellant’s case on negligence which, it contended, his Honour had accepted elsewhere in his judgment; and

(ii) The primary judge erred in his findings as to contributory negligence and proportionate liability.

 

As to contributory negligence, even a person with Dr Bear’s lack of financial sophistication should reasonably have considered the prudence of depositing significant amounts of money with Mr Lewis’ company. Mr McGoldrick’s negligence was however of significantly greater importance in causing the appellant’s loss than that of the appellant, and responsibility for the loss should be apportioned 10% to the appellant and 90% to Mr McGoldrick.

 

The primary judge found that the appellant did not suffer any loss, and was therefore not entitled to damages, because its principal, Dr Bear, gave evidence that it would not have made any difference to him if the relevant assets in the financial statements had been described as “Loans to LSLH” rather than as “Cash to LSLH”.

 

On Appeal - What should concern us as auditors

Below is parragraph 88 & 91 of the judgement where the honorable judges made comments regarding what is expected from an SMSF Auditor:

On the other hand, Mr McGoldrick was a very experienced accountant and auditor who was engaged for the purpose of protecting the Fund and its trustee against financial risks that included the very type of risk that eventuated, namely that loans forming part of the Fund’s assets might not be recoverable because of the poor financial position of the debtors. For the reasons given earlier, Mr McGoldrick was clearly negligent in failing to make proper enquiries as to the recoverability of the amounts held by LSL Holdings and failing to report the results of those enquiries to the appellant trustee.

 

Taking these matters into account and giving particular, although not determinative, significance to the fact that it was amongst Mr McGoldrick’s duties to protect the appellant against the very harm that it suffered, I consider that responsibility for the loss should be apportioned 10% to the appellant and 90% to Mr McGoldrick.

 

What are the auditors duties

What needs to be understood by all SMSF Auditors that in this case, the courts have defined the extent of audit role of an SMSF auditor. The above comments suggest that auditors duties include:

  • Protecting the fund assets
  • Making proper enquiries as to the recoverability of assets

 

The honourable judges are perhaps interpreting the expanded duty of an auditor under Section 130 of SIS Act: Obligations of actuaries and auditors--solvency

When section 130 applies

(1) This section applies to a person in relation to a superannuation entity if:

(a)  the person forms the opinion that the financial position of the entity may be, or may be about to become, unsatisfactory; and

(b)  the person formed the opinion in the course of, or in connection with, the performance by the person of actuarial or audit functions under this Act, the regulations, the prudential standards or the Financial Sector (Collection of Data) Act 2001 in relation to the entity.

(2) Subject to subsection (2A), the person must, immediately after forming the opinion mentioned in paragraph (1)(a), tell the Regulator, and a trustee of the entity, about the matter in writing.

 

Who should make SMSF investment decisions

It is clear that the Trustees are ultimately responsible for investments and must have an investment strategy and should consider many issues before investing. My role as an auditor is to ensure that all investments are as per the investment strategy and the fund has complied to all the sections numbers listed in the ATO audit report and the financial statements are fair representations of facts.

 

Auditors New Role

However, after this decision, it seems that the courts have interpreted that it is the SMSF Auditors role to protect the fund's investments and inform trustees of any future potential loss. To me, as an auditor, I believe in doomsday, nothing will remain after I sign off the audit report. E.g. look at AMP's market value - they are 60% down and look at what is happening to Sydney property market - 20% slide may mean $100,000's down.

My job should be to warn Trustees on all investments and keep only cash. And, if the Aussie dollar goes down against other currencies, Trustee will still have a case against me. So, I am being turned to pulp, in every audit by every Trustee!

Question: Should I be auditing anymore for a measly 500 bucks?

 

Manoj Abichandani: The above information is not legal advice - it is for educational purposes only.

If you are an SMSF auditor and have issued unqualified audit reports in the past where the SMSF Trustee has invested in shares or other any other investments where they have suffered a significant loss, please seek legal advice as soon as possible and talk to your professional indemnity insurer and your professional body. You need help now.  

 


 

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Online SMSF Audit offers you a risk-free chance to try the software without purchasing. No credit card required to register. Your account will use the full version of the software and will be credited to audit five funds for free.

There are no feature limitations to the trial version! To continue using the software after trial 5 funds, purchase a single license to audit your 6th fund or purchase a discounted bundle pack. Simply follow the easy steps below to utilize the trial.

You are just seconds away from discovering why Online SMSF Audit is the leading audit solution for large and small SMSF auditors. Over 82,000 funds audited on the online SMSF Audit software.

 

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

 

 

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

Topics

  • Do more with less time using an Online Audit Program
  • Audit of Funds with Pension members above Transfer Balance Cap Amount
  • SMSF audit under the new regime of Contributions / Total Superannuation Balance
  • CGT Relief - What is it and who can claim and how to audit funds who have claimed them

 

Seminar : Let us show you... How to reduce SMSF Audit time in half! - 6 CPD hours in SMSF Audit

 

 

Venue: Hilton Sydney - City     Date: 13th November 2018

 

Timings : 09:00 am to 04:30 pm

 

Cost: The fee for seminar is $165 Incl. GST and is tax deductible(Plus Travel). Includes 10 audits worth $187 Incl. GST

 

Let us show you...

How to reduce SMSF Audit time in half!

Do more with less ...

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

OVER 82,000 funds audited using the system.

Green Chit given by Professional body reviewers - Meet and Exceed your Professional requirements.

 

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. 

 

 

 
 
 
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