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Triennial audit risks industry contraction

The SMSF audit industry could witness increased contraction and consolidation should the triennial audit cycle policy proposal be legislated, an auditor has warned.

Evolv executive director Ron Phipps-Ellis said the SMSF audit industry has hitherto been immune from acquisitions that many SMSF administration firms have been subjected to over the last few years.

However he said it would not surprise him if the triennial audit cycle policy for SMSFs results in some level of consolidation in the industry, and foresaw a different landscape in the SMSF audit industry by 2020.

“The number of ASIC (Australian Securities and Investments Commission) registered SMSF auditors has been trending downwards certainly since compulsory ASIC registration was introduced back in somewhere around 2013,” Phipps-Ellis told selfmanagedsuper.

“And that number is currently just under about 6000 ASIC registered SMSF auditors. It’s possible that number could reduce. Whether it’s substantial or not I’m not sure.”

Phipps-Ellis also warned the main challenge for businesses will be interruption and disruption.

“If some SMSF audits are only done triennially versus annually there will be a large resourcing issue in increasing and decreasing those staff during those three yearly periods and the sustainability of some audit firms will be questioned,” he said.

Phipps-Ellis added if the policy results in a reduction in the number of SMSF auditors audit fees could either remain constant or perhaps even trend upwards.

Further he said some of the older practitioners might decide to exit the SMSF audit industry if they deem it is no longer viable.

Evolv conducted a survey of trustees, accountants, SMSF administrators and auditors to support its submission in repose to the triennial audit proposal. Out of the 583 individual responses representing around 44,500 SMSFs, 48 per cent of auditors said they will review their decision to provide SMSF services should the measure come into effect.

The submission has noted SMSF auditor registration and competency could decline.

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