An SMSF auditor experiencing intimidation from a client is usually best served resigning the account, however, situations where this course of action may not be practicable can still be properly managed without compromising a professional level of independence, a specialist practitioner has demonstrated.
At her firm’s recent seminar series, Super Sphere director Belinda Aisbett told delegates how she had been able to manage a scenario and maintain her independence where a client was attempting to intimidate her into producing a favourable audit report.
The situation in question involved ATO compliance action against an SMSF that had not been audited properly in the past and after investigation was facing an $11 million tax liability. Super Sphere was engaged to redo the fund audit in an effort to mitigate the potential penalty.
“I had drafted up my audit report and I sent it to the lawyers and said: ‘I want to have a conversation with you, the client and the legal team to [allow everyone to] understand the audit opinion so that when we go to the ATO we’re all on the same page,’” Aisbett said.
“When I got to the meeting, the client said: ‘Belinda, if you get this wrong, we’re going to sue you.’
“And then they said: ‘If you don’t give us the opinion that we like, we’re not paying you.’”
She said she received payment for her services and was satisfied she had demonstrated professional independence by not changing the audit report.
“I felt really comfortable, notwithstanding I was intimidated, that my audit opinion was independent because I’d already drafted my opinion,” she said.
“If I’d changed my opinion to get my fee, then clearly I wouldn’t have been independent. But because I didn’t actually change my opinion to get my money, I felt I had enough evidence in my file to detail that.”
She pointed out she did not only rely on the final unchanged audit opinion as proof of her required independence and took steps throughout the process to evidence this as well.
“I did have a massive amount of file notes in relation to this particular audit,” she said.
“[But usually] as soon as you got an intimidation threat you resign [the account].”
