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I have taken over an audit from a retired auditor. The software used is clearly not SMSF specialist software. One member has life/TPD insurance that is being treated as a fund expense not directly allocated to his member account. I have advised the accountant this needs to be rectified (for years!) but they've come back to me saying "our software doesn't do that". Is this an audit issue that requires reporting?
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Hi Lynda
Yes agreed the life insurance needs to be allocated to a member so the accounting treatment is not correct.
Arguably this is a breach of Regulation 5.08 of SIS as minimum benefits are not being maintained re the member that has life insurance being incorrectly allocated to their account.
The auditor contravention report (ACR) reporting criteria state:
"Test 3: Trustee behaviour test
You must report a contravention of a section or regulation listed in tablesĀ 1A and 1B where the trustees have previously received advice of a contravention and after receiving this advice, they breached the same section or regulation, even if it does not meet the reporting threshold test. For example, you may establish that the trustees received advice of a contravention previously from reviewing the fund's prior year working papers."
That is if you argue a breach of SIS Regulation 5.08 has occured then yes you should report it via the ACR on the basis that you have previously reported the breach (or they have been advised of the breach) and the same breach has occured.
Thanks
The Auditors Institute