On 26 Feb 2018, the ATO updated their page ‘ ASIC approved auditors of SMSFs (Self Managed Superannuation Funds) which are by far, the greatest number of funds, and which hold a very substantial share of the overall pool of superannuation assets.
Approved SMSF auditors do have a critical role in maintaining the health and integrity of the SMSF sector. And the ATO works closely with ASIC to ‘support’ and regulate SMSF auditors (code for: ‘they’re watching you’).
Problem areas identified
Bearing this in mind, the ATO identifies the following as problem areas.
- auditors who appear to be auditing funds where they have a role or responsibility for preparing the accounts and financial statements;
- auditors who appear to be auditing relatives’ funds;
- low-cost auditors; and
- CPD compliance. [Note, you could use this site for CPD.]
In all seriousness, however, these are all a concern.
Future compliance approach
The ATO said that it will visit about 300 auditors, this year, who have been identified as having some kind of risk.
Past compliance experience
So far this financial year, the ATO has referred 31 SMSF auditors to ASIC for further investigation:
- 25 auditors had issues relating to insufficient evidence
- 23 of those 25 auditors also had independence issues
- over half of the 31 auditors failed to ensure the fund’s assets were at market value.
In comparison, during 2016-17, the ATO referred 22 SMSF auditors to ASIC. The increase reflects, in part, our increased focus on auditor assurance.
Checklists of requirements
To assist auditors, SMSF trustees, and their advisers, the ATO set out the following checklists of duties and requirements.
Auditor professional requirements
To conduct SMSF audits, you must:
- be registered with ASIC as an approved SMSF auditor
- have a valid SMSF auditor number (SAN) and
- meet ongoing obligations as prescribed by the Superannuation Industry (Supervision) Act 1993 (SISA) and the Superannuation Industry (Supervision) Regulations 1994 (SISR).and
- conduct the following on an ongoing basis:
- keep your auditor details up to date with ASIC
- complete and lodge your annual statement to ASIC
- pay the annual statement fee to ASIC
Super Legislation (SISA) requirements
Under the SISA, you must comply with:
- the auditor independence requirements set out in Code of Ethics for Professional Accountants (APES 110) made by the Accounting Professional & Ethical Standards Board Limited (APESB) and issued in December 2010
- the applicable auditing standards issued by the Auditing and Assurance Standards Board (AUASB), which include the relevant Australian Auditing Standards (ASAs) and the Standards on Assurance Engagements (ASAEs) the SMSF auditor competency standards issued by ASIC in Class Order [CO 12/1687] Competency standards for approved SMSF auditors
- the reporting requirements, including for auditor contravention reporting
- the prescribed ongoing professional development requirements
- the requirement to hold prescribed professional indemnity insurance
- any conditions imposed on your registration by ASIC
Study Questions (answers below*)
- Does ASIC authorise auditors to audit SMSFs?
- Are two of the problems the ATO identified auditing (in essence) ‘their own’ accounts and low cost audits?
- Are these both examples of a breach of the independence standards?
- Does the CPD requirement come from SISA?
- Has the ATO referred 300 auditors to ASIC, so far this year?
- Of the auditors referred, did over half fail to ensure that assets were reported at ‘market value’?