Using appropriate eligibility criteria to determine whether an SMSF qualifies to be audited every three years rather than annually will not mitigate the risks associated with the federal government’s proposal to relax the frequency of sector audits, according to an industry body.
The Institute of Public Accountants (IPA) has raised concerns that some of the problems it identified during the consultation period for the government’s proposal to move SMSFs to a three-year audit cycle seem to have fallen on deaf years.
“Instead we read glib responses made in the government’s discussion paper that concerns ‘will be mitigated by appropriate eligibility criteria and, if necessary, transitional arrangements’,” IPA chief executive Andrew Conway said.
“Considering the concerns we have already raised with other stakeholders, we find this statement to be unhelpful and in fact downplays the important role that SMSF auditors perform in the regulatory oversight of trustees.”
In addition, Conway expressed doubts about Treasury’s categorical declaration risks “will be” mitigated, arguing this indicates a lack of understanding of SMSF procedures and the environment under which they operate.
“There are risks that cannot be mitigated by limiting access to a three-yearly audit cycle by using appropriate eligibility criteria. One example to illustrate this point relates to ensuring assets are held on trust for the superannuation fund,” he said.
“If the title is not in the name of the super fund, there is no safeguarding of assets held in trust to protect the assets from creditors or other claimants.”
Further, he argued not all breaches by trustees end up being reported as contraventions due to the work done by auditors behind the scenes.
“Many fund trustees receive a management letter from the auditor, outlining minor compliance issues, preventive advice and education advice. Without this sort of timely check and balance we fear a spike in contraventions which could have been avoided,” he said.
The ATO cannot mitigate all risks by monitoring super annual returns, as the government’s discussion paper suggests, he added.