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Auditing, Financial Planning

Advisers key to auditor independence

Advisers key to auditor independence

Auditor independence is essential to fund compliance and should be prioritised by advisers on behalf of their SMSF clients, a legal expert says.

Advisers should regard auditor independence as an important aspect of looking after their SMSF clients and conduct an independence assessment before each engagement, an SMSF legal expert has said.

Citing the ATO’s recent update to its approved SMSF auditor checklist, DBA Lawyers director Daniel Butler pointed out auditor independence was essential to fund compliance and should be given due consideration by advisers.

“Lack of independence can cloud an auditor’s judgment and can cause non-compliance to go undetected or ignored to the detriment of the SMSF,” Butler said in a blog post on the DBA Lawyers website.

“Advisers should not take a ‘one-size-fits-all’ approach to engaging an SMSF auditor for their SMSF clients, but should assess each engagement on a case-by-case basis.”

Advisers and the auditor being considered for engagement should complete an independence assessment to ensure the auditor was “independent of mind and in appearance” of the SMSF trustee, he added.

He also acknowledged committing to auditor independence in this way might not always result in an ideal scenario for advisers, especially in the event of a contravention having occurred based on their advice.

“Advisers are broadly aware that being independent can interfere with a client/auditor relationship between the adviser and the SMSF auditor. The commercial reality of some relationships is that the adviser’s client is also the auditor’s client,” he said.

“A conflict between the adviser and SMSF auditor can arise if any contraventions have occurred. This may be the case where investment strategy advice has been given by an adviser, but the advice has led to a contravention.”

In addition, he noted regulators were placing auditors under greater scrutiny.

“Recent developments [are] placing increased responsibility and accountability on SMSF auditors,” he said.

“SMSF auditors are also being more closely monitored by the ATO and the Australian Securities and Investments Commission (ASIC) to ensure they are appropriately discharging their obligations.”

Last month, ASIC took action over the misconduct of three SMSF auditors following concerns they had failed to meet ASIC requirements.

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