On 18 October 2018, the ATO released Practice Statement PS LA 2018/1Self-managed superannuation funds – referral of approved SMSF auditors to ASIC on Thursday, 18 October 2018.

Since 31 January 2013,  ASIC has been responsible for taking actions against approved SMSF auditors, who have not met their ongoing obligations, and ATO staff have the power, under s 128P of the Superannuation Industry (Supervision) Act 1993 (SIS Act), to refer SMSF auditors to ASIC for possible enforcement action. ASIC took on this role under the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Act 2012 (Relevant Act).

In deciding whether to refer a matter (relating to an auditor) to ASIC, the Practice Statement articulates the factors ATO staff take into account. They include, the following.

  • the auditor is not a ‘fit and proper person’ to be an approved SMSF auditor;
  • in conducting an audit, the auditor of an SMSF, has contravened the SIS Act or its Regulations, or
  • has failed to perform adequately and properly any of their required duties and functions under SISA/Regulations or other Commonwealth, State or Territory laws.

‘Fit and proper person’ considerations, include the following.

  • their character or reputation;
  • the qualities of honesty, knowledge (or professional competency), and ability (that is, the ability to act appropriately);
  • the failure to perform any of his or her duties and functions adequately and properly, including:
    • auditing funds they were a member of; or
    • failing to obtain sufficient evidence; or
    • inadequate documentation in support of an audit.

When AISC is determining whether an SMSF auditor is a ‘fit and proper person’, the ASIC SMSF Auditor Act says that ASIC should consider whether the Applicant:

  • has been or is currently subject to disciplinary action, including, but not limited to, suspension and exclusion from practice, by a regulatory body or a professional association;
  • has been or is currently disqualified or banned under provisions of an Act or legislative instrument under Commonwealth, State or Territory law;
  • has been or is currently the subject of administrative, civil or enforcement action, which were determined adversely (including consenting to an order or direction, or given an undertaking to not engage in unlawful or improper conduct) in any country;
  • has been convicted or have legal proceedings pending for any criminal offences, any acts of dishonesty (such as theft or fraud), any breach of trust or fiduciary duty, any professional misconduct or other misconduct;
  • has served a term of imprisonment;
  • has been obstructive, misleading or untruthful in dealing with regulatory bodies or a court;
  • has failed to deal with conflicts of interest appropriately; or
  • has or has had the status of undischarged bankrupt or there is any such action pending.

Accordingly, the Commissioner says that ATO staff should note any of these things, when referring the Auditor to ASIC.

FJM 4.11.18

[ATO website: PS LA 2018/1; LTN 197, 12/10/18; LTN 201, 18/10/18; Tax Month – October 2018]

 

CPD questions (answers available)

  1. Under what section of the SIS Act can ATO staff refer an SMSF auditor matter to ASIC?
  2. What is the next listed issue, after being a ‘fit and proper person’, for referring an audit matter to ASIC?
  3. Does ‘honesty’ matter?
  4. Does auditing your own fund matter?
  5. Does knowledge and ability matter?
  6. Does the amount of evidence gathered, for the audit, matter?
  7. Does being the subject of disciplinary proceedings matter?
  8. Does a breach of a trust or fiduciary duty matter?
  9. Does being obstructive matter?
  10. Does being an undischarged bankrupt, or the subject of bankruptcy proceedings matter?
  11. On what date was the Practice Statement issued?

[Answers:1.128;2.SISbreachInAudit;3.yes;4.yes;5.yes;6.yes;7.yes;8.yes;9.yes;10.yes;11.18/10/18]

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