A specialist lawyer has suggested a statement contained in the discussion paper addressing the proposal allowing certain SMSFs to move to a three-yearly audit cycle gives practitioners the opportunity to continue to solely provide annual auditing services.
Speaking at his firm’s latest strategy seminar in Sydney, DBA Lawyers special counsel Bryce Figot said the discussion paper statement, saying “SMSF trustees that are eligible for the three-yearly audit cycle can choose to continue annual audits”, gives SMSF auditors the ability to continue their service provision unchanged.
“That’s the secret, which isn’t such a secret. Don’t go into this system,” Figot advised.
“And if you have a client that wants three-yearly audits, and everyone is going to run their businesses differently, but I’d be very inclined to say to my clients ‘[if that’s what you want] then you’re not going to be my client. If you’re my client, you get yearly audits’.
“And it might even be worthwhile to have an information evening or a news sheet or a fact sheet where you say ‘this is why it is better for you to have annual audits’.”
In addition, he pointed out there are potential hidden costs to the proposal that to date have not been considered.
This stems from the condition contained in the discussion paper that an SMSF will still require an annual audit if a key event occurs, such as the death of a member, the receipt of non-arm’s-length income, transactions with a related party or in-specie lump sum payments to a member.
“Who’s supposed to work out if a key event happens? The tax agent or the administrator, and the administrator to try and work out the segments of their client base [as to which clients might need] an audit this year,” he said.
“So you’re going to have to do a mini pre-emptive audit. Who’s going to determine if those events happened and is that person supposed to work for free?
“There are hidden costs that aren’t being factored in.”
He said he remains unconvinced trustees will enjoy any cost saving from the measure.
“If the auditor says ‘I think this value is misstated’, and you’ve got three years of income tax returns to unpick and three years of financial statements to unpick, that’s a heck of a lot more expensive than if it was done in respect of year one,” he said.
“And that’s the sort of thing we need to say to our clients that it is therefore in their best interests to not go into this three-yearly cycle.”
