I am auditing an SMSF which has a portfolio of listed Australian shares, international equities and cash managed by a financial advisor based in New Zealand. The financial advisor prepared (as noted in the reports) the end of the year portfolio and tax reports in NZ$ without supporting audit report/review being supplied on its activities and nor for the custodian. I received a letter form an organisation who claims to be the custodian but there is no formal link to the financial advisor. The letter from the "custodian" is effectively a self review. In the absence of an independent audit report/review, I am comfortable to qualify Part A of the audit report. However, are there any other issues that need to be considered?
Hi Ron
I agree that without an independent audit report / review re the portfolio reports you would need to qualify Part A of the audit report.
Other issues to consider are:
1) Are you able to verify the assets held in the portfolio directly? As you refer to a custodian I assume the assets are not held directly in the name of the Fund but in the name of the custodian.
2) The Trustee of the Fund should be advised directly in relation to the qualification of Part A of the audit report (& re any concerns that you have).
3) Audit engagement letter could be amended to note that the Trustee is responsible for reviewing the controls in place in relation to the portfolio managed by the adviser.
4) Obtain a resolution / minute signed by the Trustee in relation to the portfolio where they acknowledge that the investments are appropriate for each member.
5) Trustee to sign a trustee representation letter that acknowledges the portfolio investments.
6) If value of portfolio investment cannot be verified qualify part B of audit report in relation to SIS regulation 8.02B - "asset must be valued at its market value". If Part B qualification this may lead to an Audit Contravention Report (ACR) being required to be lodged by the auditor.
Thanks
SMSF AAA