SMSF auditors should take an in-depth look at the relationships they have with other businesses, even those outside financial services, to avoid breaching their independence obligations, a technical specialist has noted.
Telstra senior tax adviser and Auditors Institute members’ forum moderator Michael Gilmour said the APES 110 requirements for SMSF auditors prohibited them from auditing an SMSF where they have a business relationship with a member or trustee of the fund, but questioned how far should auditors look into these relationships.
“Let’s say you engage the services of Fred the plumber to fix a leaking tap at your home, and he has the Fred SMSF and that fund is your audit client, and you pay Fred the plumber $400, which is market value for his services,” Gilmour said at the Auditors Institute Auditors Day 2025 in Melbourne last week.
“Is that an instance of a business relationship that would somehow render you as ineligible to undertake the audit of Fred SMSF?
“I was a bit ambiguous about the facts, so did you know about the relationship in the first place?
“If the reason you contacted Fred the plumber in the first place was because last week you saw Fred SMSF on your desk and thought ‘a-ha’, I think you are leveraging off that relationship to engage someone to provide a service to you.”
He said the dollar amounts in such cases tend to be very small, but he pointed out it was critical for auditors to retain a good perception of the risk issues they may face.
“What if, innocently, you engaged Fred the plumber and it occurs to you weeks or months afterwards that you have actually done the audit for Fred SMSF or will be doing the audit? To what extent do we have a business relationship?” he added.
“You may be thinking I have taken an incredibly broad and elastic approach as to what constitutes a business relationship and that APES 110 is actually thinking more along the lines of where you have an equity interest or a debt interest in the business in question.
“I’ve deliberately chosen an example that is so innocent it begs the question of whether that is a business relationship that APES 110 should have us concerned about.
“Those kind of transactions are going to happen, and so long as there’s no suggestion whatsoever the charge we pay to Fred the plumber is any different to what anyone else would charge, I don’t think we have got an issue.
“I would be more comfortable if we were unaware of that relationship in the first place and I would not deliberately go out and seek these relationships.
“This might sound incredibly conservative and risk averse, but if your local hairdresser has an SMSF, get your hair cut there, but my suggestion to you is don’t audit their SMSF.”
