What your SMSF auditor actually checks, in plain English

Every year you send your SMSF records off to be audited, and a report comes back. But what is the auditor actually doing in between? This article explains, in plain terms, what your auditor checks and why.

Two jobs in one audit

Your auditor does two separate jobs. The first is checking that the fund’s financial statements are accurate, which is called the financial audit. The second is checking that you have followed the super rules, which is called the compliance audit. They give a separate opinion on each, so it is possible to pass one and have a problem flagged on the other.

Do the assets exist and does the fund own them

The auditor confirms that the assets shown in the accounts are real and that the fund actually owns them. For a bank account, they get confirmation the account is in the fund’s name. For shares, they check a holding statement. For property, they check the title. A big thing they look for is whether everything is in the fund’s name rather than your personal name, because the fund’s assets have to be kept separate from yours.

Are the assets valued correctly

The auditor checks that each asset is shown at its market value, which means what it is really worth at the end of the financial year, backed by evidence. This is one of the most common areas where they ask questions. For property and other hard-to-value assets, they will want to see proper evidence, not just a figure you have estimated. Carrying the same value year after year with nothing to back it up is something they will pick up.

Have you followed the super rules

This is the compliance side, and it covers the rules that matter most.

The auditor checks that the fund is being run only for retirement, not for a benefit to you today. They check that you have not lent the fund’s money to yourself or family, or used it to help yourselves financially. They check that any dealings with people connected to you, like renting a fund property to a relative, are on normal commercial terms. They check that any investments connected to you stay within strict limits. And if anyone is drawing a pension, they check the right minimum amount was actually paid.

Did contributions and payments follow the rules

The auditor checks that money paid into the fund was allowed to be accepted, and that any money paid out met the conditions for being released. Super is meant to stay locked away until you are entitled to it, so taking money out early is a serious issue they look for.

What happens if they find a problem

If the auditor finds something wrong, they tell you. For smaller matters, they may simply note it in a letter and suggest you fix it. For more serious breaches, they are legally required to report it to the regulator, and they have to do this even if you have already fixed it. They are not trying to catch you out; reporting serious breaches is part of their legal role.

Why the audit helps you

It is easy to see the audit as a hurdle, but it works in your favour. It catches mistakes before they grow, it keeps the fund on the right side of the rules, and a clean audit gives you confidence the fund is being run properly. The auditor is an independent set of eyes on something that matters a great deal: your retirement savings.

The bottom line

Your auditor checks that the fund’s assets are real, owned by the fund and valued properly, and that you have followed the super rules, especially keeping the fund separate from your personal finances and running it only for retirement. If they find a serious breach they must report it, but most of what they do quietly protects you and your fund.

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This article is general information for trustees and members. It is not financial, legal or tax advice about your particular situation. Consider getting advice from a licensed professional before making decisions about your fund.