The ATO has reported more than two-thirds of the 51 auditors it has examined to date as part of its ongoing review of the top 100 SMSF auditors have required further education.
The review, looking at the top 100 auditors who are responsible for auditing 33 per cent of the total population of SMSFs and representing around $186 billion in assets, commenced at the end of the 2019 financial year and is expected to be completed by the end of this financial year.
“Each of these auditors audit more than 500 funds a year and on average audit 1500 SMSFs. We audit this group to seek assurance that this large proportion of SMSFs receive a proper and adequate audit and that this group of auditors are meeting their statutory obligations,” the ATO said.
“A particular focus of a top 100 SMSF auditor compliance review is to understand and gain assurance about the methods, processes and controls in place that allow the SMSF auditor to sign off on a large number of audits annually.”
Of the 51 auditors reviewed so far, 10 were found to be fully compliant, 36 required further education, three auditors voluntarily deregistered once the review had commenced and two were referred to the Australian Securities and Investments Commission (ASIC).
Of the 36 auditors requiring further education, 23 were found to have not obtained sufficient appropriate evidence verifying the fund’s compliance with the super laws, including market valuations from trustees for unlisted units in trusts and evidence for limited recourse borrowing arrangements.
“Apart from the two auditors we referred to ASIC, the deficiencies identified in the remaining top 100 auditor population who received education did not warrant a referral to ASIC,” the ATO said.
“However, we’re concerned that some auditors failed to obtain sufficient appropriate audit evidence or failed to evaluate the evidence in order to demonstrate how the auditor arrived at their opinion on the financial and compliance audit.
“We’re also concerned with the number of unsigned financial statements we found and the lack of other documents that should be on the audit file, such as a signed trustee representation letter, engagement letter and, in some cases, a management letter.”
The regulator stated the auditors who received further education would continue to be monitored and reviewed again in two to three years.
Those who had not improved their auditing processes by that time may be referred to ASIC for further action, it added.
Last month, ASIC took action over the misconduct of three SMSF auditors following referrals from the ATO.