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Auditor registration improving audit quality

The ATO has affirmed the SMSF auditor registration requirement is already making a difference in improving the quality of audits in the industry, particularly through the elimination of practitioners who were servicing a very small number of funds.

“In this transition we’ve seen a massive decrease in the number of the smaller under 20 [fund] operators combined with a real growth in the ones doing over 50 and those doing over 250. So that’s a really good thing for us,” ATO approved auditors and active compliance liaison director Howard Dickinson told the 2015 SMSF Association National Conference in Melbourne last week.

Dickinson said it was a significant development due to the quality of work associated with auditors who were servicing a very small number of clients that the regulator had discovered since the start of the registration process.

“What’s been really interesting from an ATO perspective is we have found, since we first started looking at the performance of auditors, that the smaller, really tiny operators, maybe doing five, 10, and in some cases two or three funds, weren’t really au fait with their obligation and requirements and didn’t necessarily understand the SISA (Superannuation Industry (Supervision) Act) obligations of an SMSF and therefore we weren’t getting great quality audits,” he said.

However, he clarified the requirement for SMSF auditors to be registered was not designed to reduce the number of practitioners.

“The intent of this was never to cull auditors, but actually to get the right people and the right professionals doing the work,” he said.

Another significant statistic he cited was the fact 25 per cent of registered auditors had lodged an auditor contravention report, a significant increase that indicated to the ATO fewer practitioners were ignoring compliance issues.

An additional positive sign he pointed to was the significant rise in the percentage of funds being audited by practitioners who serviced over 50 funds.

“That’s a really good sign for us [because] it makes it easier for us as regulators to know if we treat and take action against an auditor we’re actually dealing with ensuring the compliance of a chunk of funds,” he said.

“Whereas if we take action against an auditor and actually improve their performance, and they’re only doing 10 [funds], from a sector point of view it doesn’t have a huge impact.

“We’re concerned about the performance of the auditors, but it’s only really from the point of view of ensuring the integrity of the sector and therefore what is happening to funds.”

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