The ATO has confirmed it considers the practice of offering low-cost SMSF audits as a high risk factor and as such will be continuing to scrutinise individuals offering this type of service.
“Low-cost, low-fee audits are a risk factor we take into account. Certainly low-cost, low-fee audits are a potential indicator that perhaps the [audit] quality required isn’t there or that the diligence required to undertake an audit isn’t there,” ATO SMSF segment assistant commissioner Kasey Macfarlane said.
However, she qualified her statement, saying the ATO took a considered approach to its monitoring in that area.
“That isn’t always conclusive something’s not right because we have to also be mindful that in a fund with very simplified affairs, such as term deposits and cash management trusts as the only investments, you might expect the costs to be lower in that particular case,” she said.
“So we don’t consider that it is unreasonable to expect auditors will have a sliding scale of fees, but certainly low-cost audits are a risk factor we certainly look closely at when we are reviewing our list of registered auditors.”
In addition, she pointed out independence was still a key risk factor in SMSF audits, but said she was not aware of any moves the regulator intended to make regarding the formulation of a code of conduct governing SMSF auditor independence.
“One of our areas of focus in the coming months will be looking at those situations where the accounting and the financial reporting happens in one organisation and the audit also happens to be performed in that organisation, albeit in a different area,” she said.
She said the ATO would actually be making on-site visits to practices identified as having a potential independence problem in order to witness their procedures.
“If we identify or detect some concerns in that area we will be referring those to ASIC (Australian Securities and Investments Commission) and they’ll undertake further investigation to determine whether or not action needs to be taken,” she said.
“But in terms of changes to that, there is nothing on the table.”