SMSFs or self-managed super funds can be managed by individuals or a small group of trustees and this allows you control over your retirement savings. But while you have flexibility as a result of these funds, you also need to be compliant with related regulations and maintain reporting. One of the responsibilities that come with managing an SMSF is the annual audit.
The reason to carry out a self-managed super fund audit is due to regulatory compliance. This is mandated by the Australian Taxation Office. Therefore, all SMSFs are required to undergo an annual audit. There are many penalties that you will be subjected if you fail to comply. Sometimes it can cause the disqualification of the SMSF. An SMSF audit will evaluate whether the fund complies with applicable rules such as benefit payment, limits to contribution and restrictions when it comes to investment. A regular audit is what demonstrates the commitment of the trustees to follow the law. There are other benefits that you can gain from carrying out an SMSF audit in addition to compliance such as being able to verify the accuracy of the fund’s financial statements. The audit requires the trustees to prepare financial statements including the expenses, income, assets and liabilities of the fund. The audit will check the accuracy of the financial statements and their comprehensiveness.
Auditing will provide a verification step
So you will have the assurance that all investments and transactions are accurately recorded and this will help avoid any discrepancies that can affect the financial integrity of the fund. This way, you can prevent your retirement funds from being jeopardised. Many trustees are known to operate honestly and maintain integrity but the requirement for an annual SMSF audit will be a safeguard against those who will not. Auditors are trained to identify any irregularities such as suspicious transactions within the financial records of the fund and be able to spot potential fraud. There are some signs for fraud they will look for such as unusual asset transfers, underreporting income and carrying out unauthorised withdrawals.
The interests of the members
Will be protected as a result of an SMSF audit because everyone will know whether the assets of the fund are managed carefully in their best interests. The commitment of the trustees to transparency will be demonstrated in their commitment to uphold the annual audit and this will also foster a level of trust among the members. This gives confidence to members that their retirement savings are responsibly managed and are in compliance with the superannuation laws of the country. An important principle in managing the investment portfolio of an SMSF includes diversification. The trustees will invest the fund assets carefully so that the risk can be spread across different asset classes. This will minimise the financial impact of market fluctuations. The investment strategy of the SMSF will be assessed during the annual audit to verify whether it complies with the requirements for diversification. This will give you an idea of whether the majority of the assets are invested in a single asset class or not.