External investment portfolio reports provided to auditors of self-managed superannuation funds (SMSFs) remain a questionable source of information and need close consideration, according to a specialist servicing the sector.
In these situations the most important element to determine is the type of service being provided to the SMSF, BDO partner assurance and super, Shirley Schaefer told delegates at the Institute of Chartered Accountants in Australia 2011 Business Forum.
"Is it just a platform service, place to collect information, or is it actually a portfolio service or a wrap account where you've got a custodial relationship between the provider and the super fund," Schaefer said.
She said she encouraged auditors to examine the fine print included on the portfolio reports they received.
"There will often be a statement on the bottom of them saying that the provider takes no responsibility for the accuracy or completeness of the information contained in the report," Schaefer said.
In these situations if the auditor chooses to rely on the information, he or she will be "hung out to dry", she said.
When clients are using a portfolio service with custodial elements or a wrap account they typically will not be given information such as holding statements, dividend butts, or contract notes. However in the absence of this information the SMSF auditor does have a separate avenue to pursue in these circumstances.
"Under those circumstances there are requirements under various parts of the Corporations Act that those entities get their systems and controls audited and from that you can get a Part B Controls report," Schaefer said.
If the auditor can acquire a Part B Controls report the other information from the service provider can potentially be relied upon.
However if a Part B Controls report is not available then the auditor will have to go back to reviewing the source documentation, Schaefer explained.
