The triennial audit proposal for clean SMSFs combined with continuing fee pressures has created an opportune period to educate trustees on the value and importance of the audit function.
“The audit’s always been seen as a grudge purchase and I think a lot more can be done,” ASF Audits technical services executive general manager Shelley Banton told the SMSF Association Local Community Event in Sydney today.
“The ATO’s been trying to do that, for example, they introduced admin penalties for breaches a few years back.
“So we are seeing a mind change when it comes to making SMSF trustees more accountable and raising the profile [of audits] and make it so it’s taken more seriously, in terms of the penalties.”
Commenting on the 2018 budget measure to allow SMSFs with a good compliance and record-keeping history to switch to a three-year audit cycle, Banton said there were already issues with funds reporting annually.
“It’s hard enough for trustees to think back over the past year about what happened with a particular transaction and explain, let alone going back three years,” she warned.
“It’s going to be a big challenge to ensure that we can do that work on a timely basis and for a reasonable fee; I do think the question around fees and the value [of the audit] is a valid one.”
SMSF Association NSW chapter chair Liam Shorte added trustees will only appreciate the audit process and its role through stronger education.
“Unless the auditors, the associations, industry and the regulators can get out there and show the importance of an audit to a trustee, it’s still going to be a grudge purchase and they will be looking for a $500 audit,” Shorte said.
Banton also raised further problems for auditors on a practical level.
“At the annual audit stage, part of what we do is spend more time making sure breaches are rectified and all the housekeeping’s in order so that there aren’t any issues by the time we’ve finished the audit,” she said.
“So if we’re doing three years in one, we’re not going to have the capacity, from a time perspective, to work with clients to do that and I think we’re probably going to see an increase in ACRs (audit contravention reports) anyway simply because over a three-year period, trustees aren’t going to remember what happened and won’t have the documentation.
“We won’t be able to work with them to get the outcome we want to get the fund compliant for that three-year period – time will be working against us and, again, we’ve got fee pressures on top of that too.”