A superannuation lawyer has suggested SMSF auditors should check their professional indemnity (PI) insurance cover to ensure they have some protection in the event their activities come under scrutiny from a regulator.
It is a requirement under section 128F(b) of the Superannuation Industry (Supervision) Act that an approved SMSF auditor must “hold a current policy of professional indemnity insurance, of a level prescribed by the regulations, for claims that may be made against the auditor in connection with audits of self-managed superannuation funds”.
“[But] not all PI insurance policies are the same. If you get audited or reviewed or referred to ASIC (Australian Securities and Investments Commission), you’re going to want a legal defence and you will want your position to be properly articulated. Fees [for these services] will be high [so you need to know if] your PI insurance will cover [them]. Some PI policies do and some do not,” DBA Lawyers special counsel Bryce Figot told SMSF Association Audit Day 2024 attendees yesterday.
“All auditors have insurance but not all insurance covers the auditor in these circumstances and everybody deserves a proper defence, but that can take time and money.”
Figot acknowledged PI insurance that covers legal expenses if an ATO or ASIC review is imposed on a practitioner can also come with its own conditions requiring to be observed.
“[If a policy has this type of coverage], there is a good chance the insurer might appoint its own panel of solicitors,” he noted.
He pointed out it is sound protection auditors should have in place, but recognised it is not a compulsory condition of PI cover.
“You want [to have that] option and if you don’t want to have that option, that’s fine. But [if you make that choice], make sure it is an informed decision,” he said.
“So check your PI insurance policy now and ensure you’re happy with [the conditions detailed].”
