The Australian Securities and Investments Commission (ASIC) has taken action against 18 SMSF auditors due to their involvement in reciprocal audit arrangements.
“Each of the reciprocal audit arrangements involved two SMSF auditors who audited each other’s personal SMSFs,” the regulator stated.
“There are no safeguards that can reduce the threats to an acceptable level and the auditors should not have entered into the arrangements.
ASIC stated it became aware of the reciprocal audit arrangements following referrals by the ATO as a result of the breaches, ASIC has accepted voluntary cancellation requests from nine auditors.
For the remaining nine SMSF auditors, ASIC imposed additional conditions on their registrations including restrictions in relation to audits of their personal funds; independence reviews to be conducted and declarations to made to ASIC about their SMSF audit clients; additional educational requirements regarding ethics and auditor independence; and a requirement to notify their professional association of the conditions.
ASIC stated the reciprocal audit arrangements created self-interest and familiarity and threaten independence and were contraventions of the independence requirements contained within APES 110 Code of Ethics for Professional Accountants (APES 110).
“These actions were appropriate considering the auditors’ individual circumstances and the developments in guidance and practice since ending their reciprocal audit arrangements,” ASIC added.
“It should now be clear to SMSF auditors that entering into reciprocal audit arrangements is an unacceptable breach of their independence requirements. ASIC will disqualify auditors for such breaches where appropriate.’
Approved SMSF auditors are registered with ASIC under the Superannuation Industry (Supervision) Act 1993 while the ATO monitors SMSF auditor conduct and may refer matters to ASIC.
The ATO has also warned SMSF auditors that reciprocal audit arrangements would be examined closely once the independence standards were applied, and earlier this year announced it had started referring auditors to ASIC.
SMSF auditors have the right to appeal decisions ASIC makes in relation to them under the SIS Act. They may request that ASIC reconsider a decision it has made against them. If the decision is confirmed or varied the SMSF auditor may apply to the Administrative Appeals Tribunal for further review of the decision.
