An SMSF specialist has dispelled the misconception commonly held by trustees and practitioners that the rectification of a compliance breach means no auditor contravention report (ACR) will be required to be lodged with the ATO pertaining to the specific matter.
“It’s worth pointing out that sometimes we think if we fix a problem, then the auditor won’t lodge a contravention report. That in itself is a myth,” Accurium senior SMSF revealed.
“Just because you’ve fixed [a compliance breach], doesn’t mean it’s not going to result in an [auditor] contravention [report].”
He pointed out while it is not possible to avoid having an ACR lodged in these circumstances, it is important to make sure the ATO knows any problem that may have been present during the income year in question has been rectified.
According to Cullen, a more important timeframe should take priority given having an ACR lodged for the fund is unavoidable.
“Where you do have a problem and you know it [will lead to an ACR], work with the auditors, work with your [accountant or adviser] and try and get it fixed before the audit is finalised,” he advised.
Further, Seamless SMSF specialist auditor and adviser Frank La Spada shed light on when an ACR no longer needs to be furnished for a compliance breach.
“This is the rule of thumb: if the breach exists in the year [the fund] is being audited, then more than likely it will [need] to be reported [using an ACR]. This will be the case for every year the breach exists until [the issue] does not occur for a full financial year,” La Spada explained.
Cullen confirmed: “So if I’m finishing off the 2023/24 audit today [where there is a compliance breach and] I get the client to rectify it tomorrow, when you come to do the 2024/25 audit, I’ll have had nearly six months of this financial year where the breach is still in existence [and so there is] going [to be] another [auditor] contravention [report lodged].”
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