The Value of an Experienced SMSF Auditor

ASIC provided a media release on Friday 8 March 2019 outlining they had acted to disqualify, suspend or add conditions to the registration of a number of auditors of self-managed superannuation funds.

The actions taken by ASIC resulted from concerns regarding audit quality, independence issues, failures to meet the fit and proper person criteria or other matters.

ASIC Commissioner John Price said:

“Self-managed superannuation fund auditors play a fundamental role in promoting confidence in the SMSF sector, so it is crucial that they adhere to ethical, auditing and professional requirements. ASIC will continue to take action where the conduct of auditors falls short.”

We have provided below some of the reasons why SMSF auditors were reprimanded.

Disqualified:

• Failing as a trustee of their own SMSF to have the fund audited;
• Falsely representing in annual returns for their own SMSF that the fund had been audited when it had not;
• Misusing their auditor number to lodge annual returns for their own SMSF;
• Failing to obtain sufficient appropriate audit evidence in SMSF audits on property valuations and title of assets, which were not held in the name of the corporate trustee; and
• Failing to use the prescribed audit report format.

Registration cancelled:

• Failing to comply with continuing professional development (CPD) requirements;
• Failing to hold an appropriate level of professional indemnity insurance; and
• Failing to lodge annual statements for two years.

Suspended as SMSF auditor for 2 years:

• Not being a fit and proper person – had received criminal convictions;
• Failing to report an SMSF audited by the person had not recorded a property at market value;
• Failing to comply with independence requirements by auditing an SMSF where his staff prepared the accounts and financial statements; and
• Failing to maintain appropriate records of compliance with CPD requirements.
• From 1 July 2013, the SIS Act required all auditors of SMSFs to be registered with ASIC. This was to ensure that all SMSF auditors meet the base standards of competency and expertise.
• ASIC and the ATO work closely together as co-regulators of SMSF auditors. The ATO monitors SMSF auditor conduct and may refer matters to ASIC for possible action such as disqualification or suspension of their registration. ASIC may also impose conditions on an SMSF auditor.

What does the above mean for trustees, members and administrators / accountants?

Ever increasing scrutiny by ASIC will continue to improve the overall level of quality that should be expected of the SMSF auditor industry by trustees, members and administrators / accountants.

SMSF auditors play a pivotal role within the SMSF sector by adding rigour and consistency in the application of legislation.

From a trustee / member’s perspective, the role of the SMSF auditor should be viewed as invaluable given they not only provide assistance to the trustee / member with respect to the financial position and performance of the SMSF (Part A of the audit report) but also the compliance of the SMSF with Superannuation Industry (Supervision) Act 1993 (SISA) and Superannuation Industry (Supervision) Regulations 1994 (SISR) (Part B of the audit report). SMSF trustees have an obligation to ensure the SMSF complies with the requirements of the SISA and SISR, this is achieved by the trustees engaging an SMSF auditor registered with ASIC.  We highlight that while the administrator / accountant of the fund will assist with the trustees in meeting their requirements under the SISA and SISR, they do not sign off to confirm compliance – SMSF auditors do sign off to confirm compliance. Because of this, SMSF trustees can be confident that where they have received an unqualified audit opinion from their SMSF auditor, they are compliant with the legislative requirements.

SMSF auditors are also a valuable resource for administrators / accountants – we often have queries in respect to transactions / legislation occurring within the financial year (in respect to SMSFs we will be signing at the end of the year). It is important for SMSF administrators / accountants to have frequent, open communication with their SMSF auditor to ensure the most appropriate advice / service is being provided for their SMSF clients. Further, we have noticed the efficiency gains that arise for all parties (administrator / accountant, trustee / members and SMSF auditor) as a result of the frequent, open communication.

Overall, we support the action taken by ASIC and welcome the continued focus on the SMSF auditor industry to continue to build a more consistent level of quality within the service.

We encourage SMSF trustees, members and administrators / accountants to check whether their auditor is registered, or whether a person has been disqualified, by searching ASIC’s SMSF auditor register: connectonline.asic.gov.au.