SMSF trustees often do not understand why the auditor request for a bank confirmation. The auditor must follow auditing standards and comply with superannuation legislation. Generally a greater reliance is placed if evidence is sourced from a third party like banks and financial institutions.
But usually a bank confirmation is not solely undertaken only to comply with an auditing standard or with superannuation legislation.
We do understand that a bank confirmation request is an additional cost to the Fund. Our experience with auditing SMSF’s have shown the following significant matters which have been highlighted through the bank confirmation process:
- Incorrect title on bank accounts e.g. held in the name of the individual trustees/directors or other persons that are no longer trustees/directors of the Fund.
- Previous trustees/directors are still the signatories to the bank account e.g. ex-spouse or ex-partners.
- Bank accounts or term deposits opened in the name of the Fund that neither the accountant nor the advisor was informed.
- Banks have incorrectly used some accounts as security for other personal member liabilities.
The trustees are generally under the impression that all is going well once they have submitted the information to the accountant or advisor. However, the aforesaid matters could potentially lead to breaches and often inappropriate use of retirement assets.