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Accounting, Auditing

Termination doesn’t end auditors’ statutory obligations

SMSF clients can terminate an auditor’s engagement if they feel the auditor is excessively inquisitive, but section 129 of the Superannuation Industry (Supervision) Act, governing the obligations of actuaries and auditors with regard to fund compliance, can still apply, according to a specialist law firm.

DBA Lawyers special counsel Bryce Figot told a webinar last Friday that section 129 will apply to an auditor if they form an opinion that a contravention may have occurred, may be occurring, or may occur in the future in relation to the entity.

“It says likely and may. At no stage do you have to satisfy yourself as to the standard of certainty, merely that it is likely that a contravention may occur in the future,” Figot said.

“It doesn’t have to have occurred yet. And you form the opinion in the course of [or] in connection with the performance of an audit function.”

In order to define ‘in connection with’, he quoted from the book “Statutory Interpretations of Australia”.

“The words in connection with are ‘capable of describing a spectrum of relationships ranging from the direct and the immediate to the tenuous and remote’ … the judgment ultimately depends upon the statutory context in which the words are used,” he said.

“Reference to other cases concerned with the identification of a connection are seldom of value. One thing that is clear is that the expression does not require a causal connection between the matters said to be connected.”

The statutory context is about protecting members’ benefits so if auditors are ever in doubt, they should lodge an auditor contravention report, he said.

He added auditors should include their view of ‘in connection with’ in their engagement letter, stating clearly they will still charge the SMSF member even if they choose to terminate the auditor’s engagement.

“I think that’s very important for practical reasons,” he said.

“And there’s a very strong chance that because I take a broad view of ‘in connection with’ I’ll still have to tell the ATO about it.”

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