The liability for accrued benefits, or member entitlements, is the present obligation to pay benefits to members or beneficiaries in the future.
Accrued benefits of a SMSF may arise from:
- accumulation entitlements where the member bears the investment risk;
- pension accounts due to members; and
- insurance claims paid or payable to the SMSF owing to members.
The audit assertions with respect to a SMSF’s accrued benefits are:
- Existence – the accrued benefits are entitlements of members.
- Rights and obligations (ownership) – the accrued benefits are obligations of the SMSF.
- Completeness – accrued benefits of each member of the SMSF have been recorded.
- Valuation and allocation – accrued benefits are recorded at appropriate amounts and allocated to the appropriate account/member.
Audit risks for accrued benefits include, but are not limited to:
- contributions not being allocated correctly to members;
- income not being allocated correctly or appropriately to individual members;
- benefit payments or expenses being allocated incorrectly to member’s balances; and
- member balances not being carried forward correctly from one period to another.