Practitioners must carefully consider the future of their SMSF audit proposition in light of the proposed triennial audit cycle and the continuing developments in audit platforms and technology, according to a professional services consultancy.
“Whether you agree with the proposed change or not isn’t really the issue. It’s more about what should be your strategy with SMSF audit going forward,” Smithink director David Smith said.
“Perhaps firstly you should ponder whether you should be doing more to help clients understand the value of an audit.
“Non-compliance in the world of SMSF can be a disaster. Poor record-keeping can be a disaster.
“Given that, for many SMSF members their SMSF represents the bulk of their retirement savings so it’s pretty important to get it right.”
Smith suggested a better communications plan to inform trustees of the value of having additional checks in the system, such as an audit to minimise the risk of non-compliance.
“I suspect many trustees are blissfully unaware of the consequences of non-compliance,” he said.
“If they were informed and they understood better that an audit helps ensure non-compliance risks are minimised, I’m sure many would be happy to see their fund audited annually.
“Mind you, perhaps if you are using a Chinese wall to conduct your audits, the client’s perception of the value of an audit could be diminished since the trustee may not feel the fund is subject to a fully independent second set of eyes.”
He noted the industry was seeing few increases in audit fees, with downward pressure on pricing driven by firms outsourcing their audits and using technology.
“It is very hard for an auditor of just a few funds to compete with the larger firms who can invest in technology, hone their processes and train their people,” he said.
“So what are your options?
“If you have only a few funds, perhaps outsourcing is the way to go. There are both offshore and onshore offerings, which enables you to benefit from technology and scale without having to make the investment yourself.”
He said the alternative to outsourcing is to invest in one of the specialised SMSF audit tech platforms.
“The advances in these platforms provide such a competitive edge in terms of efficiency and audit quality that those who haven’t adopted them are falling way behind,” he noted.
“Going forward, it seems clear that the tech platforms are only at the beginning of their evolution: artificial intelligence will become more sophisticated in conducting analytical reviews and determining compliance, and big data will also enable auditing across funds.
“So perhaps at your next strategy day, you should put some focus on your approach to SMSF audit.
“There are opportunities to improve your service offering and profitability of the service.”
He added it would be unwise to think the world of SMSF audits is not undergoing fundamental change.
“The next few years will see even more change as technology continues its relentless march,” he said.
“Now is the time to set yourself up to provide the high-quality, cost-effective service that you can.”