One of the most common arguments for the continual downward pressure on SMSF audit fees is that advances in technology have made the SMSF audit process cheaper.
But with SMSF audit fees as low as $141, there’s no doubt the professionalism of SMSF auditors will (and should) come under scrutiny.
The ATO has already announced it is looking into low-cost SMSF auditors who offer a heavily discounted flat fee for every single audit, regardless of complexity.
There are some who argue a low-cost fee doesn’t mean a second-rate SMSF audit.
But when will we accept the anecdotal evidence that exposes the low audit standards at these cutthroat prices?
During an SMSF conference in 2015, one of the presenters confided to delegates that they had ‘road-tested’ an SMSF auditor who advertised audits for a $330 flat fee.
Our intrepid colleague emailed their documents through to the SMSF auditor, had not yet signed a terms of engagement or trustee representation letter, but received a copy of the signed audit report by email within 10 minutes.
That’s not an SMSF audit; it’s a very expensive SMSF mail merge.
It goes without saying the auditor should be investigated by the ATO and referred to ASIC and their professional body for review.
The most uncertain and worrying outcome in all this is that SMSF advisers may, unknowingly, be making a choice that will cannibalise their firm’s future.
The cumulative effect of the ATO investigating SMSF auditors who aren’t doing the right thing, combined with an ASIC SMSF auditor disqualification, may mean the SMSF auditor won’t be around tomorrow.
That may not sound like such a big deal, but it’s not going to bode well when the ATO audits a fund and finds compliance breaches bigger than a black hole.
With litigation touted as the next big problem facing SMSF advisers, it’s safe to say trustees who thought they had a complying fund will be on the prowl for compensation, especially when the tax office starts handing out hefty fines.
As the SMSF adviser recommended the auditor in the first place, the trustee’s SMSF lawyer will make a beeline for the SMSF adviser’s professional indemnity insurance. The SMSF auditor won’t be around to face the music.
There are two main reasons an SMSF adviser will choose to recommend a low-cost SMSF auditor to their clients:
• the mark-up on the SMSF audit fee is too good to pass up, and
• the SMSF auditor is known for easy SMSF audit outcomes.
However, that line of thinking won’t stand up to scrutiny by peers. The SMSF adviser is then left to watch their insurer settle the claim out of court and next year’s premiums explode.
There’s also the additional stress and worry of facing a potential disciplinary action from their professional body and loss of reputation (and clients).
When this situation is multiplied by the number of clients administered by an SMSF adviser, it’s easy to see how the false economy of saving a few dollars now could lead to a disastrous financial outcome in the future.
Safeguarding your SMSF clients and your practice is the key to future success. The answer is to partner with a long-standing SMSF audit firm you trust to provide a quality service.