Reporting Compliance Breaches
In determining whether to report potential or actual contraventions (breaches) identified during the compliance engagement, the auditor applies different criteria in relation to their reporting obligations to:
- a trustee in the management letter;
- a trustee under SISA sections 129 or 130;
- the ATO, in an ACR, under SISA sections 129 or 130; and
- the trustees in the auditor’s compliance report.
The auditor reports to a trustee in writing under SISA section 129 any reportable contraventions of the SISA or SISR, which it is likely may have occurred, may be occurring or may occur, regardless of the materiality of those contraventions. The auditor also reports to a trustee under section 130 if the financial position of the SMSF may be, or may be about to become, unsatisfactory.
The auditor reports events which may lead, or have led, to one or more contraventions of the SISA or SISR to the ATO in an ACR where they are contraventions of sections or regulations specified in the ACR and, either:
- those contraventions meet the reporting criteria, which comprise seven tests specified in the ACR instructions; or
- those contraventions do not meet the specified tests, but the auditor wishes to report them as a result of the exercise of professional judgement.
In addition, the auditor reports to the ATO in an ACR under section 130 if the financial position of the SMSF may be, or may be about to become, unsatisfactory.
ASAE 3100 requires the auditor’s report on compliance to be modified if, in the auditor’s judgement, material non-compliance with a requirement may exist. Consequently, the auditor determines whether any potential or actual contraventions of the SISA or SISR identified during the audit are:
- contraventions of sections of the SISA or SISR specified in the approved form auditor’s report; and
- material to the SMSF.
In determining whether a contravention identified is material to the SMSF, and therefore whether a modification to the auditor’s report is warranted, the auditor uses professional judgement.
Even if a contravention is reported in an ACR, it does not necessarily result in a modification to the auditor’s compliance report. The auditor, nevertheless, considers the contraventions which meet the reporting criteria specified in the ACR instructions, and uses professional judgement in determining the impact, if any, on the auditor’s compliance report.
The circumstances which may result in a modification to the auditor’s compliance report are where:
- a limitation on the scope of the auditor’s work exists, due either to circumstances or a trustee imposing a restriction, which prevents the auditor from obtaining the evidence required, in which case the auditor expresses a qualified opinion or a disclaimer of opinion; or
- the SMSF did not comply in all material respects with the requirements included in the approved form, in which case the auditor expresses a qualified or adverse opinion.
A qualified opinion is expressed as being ‘except for’ the matter to which the qualification relates when that matter is not as material or pervasive as to require an adverse or disclaimer of opinion.
Where an auditor forms an opinion that it is likely that a contravention may have occurred, may be occurring or may occur, the reporting criteria and the list of reportable sections and regulations that an auditor applies to determine whether a report to the ATO is required, are listed in the ACR instructions (NAT 11299). See www.ato.gov.au/Forms/.
The ACR instructions (NAT 11299) and the ACR (NAT 11239) are approved forms and can be obtained through the ATO’s website at www.ato.gov.au/Forms/. Additionally, eSAT software is available free of charge from the tax office to assist in completing the compliance assurance engagement and reporting breaches (contraventions) appropriately to the ATO. See www.ato.gov.au/Calculators-and-tools/Electronic-super-audit-tool/?=redirected_esat for further details.