A leading specialist auditor has warned practitioners about the dangers of advocacy work on behalf of clients due to the effect this could have on establishing a professional level of independence, given it is an issue the Australian Securities and Investments Commission (ASIC) has highlighted.
“ASIC drew attention to the advocacy threat, which I found really fascinating when the competency standards were released because I don’t advocate on behalf of my clients, but clearly ASIC thinks auditors may have that risk,” Super Sphere director Belinda Aisbett told delegates during her firm’s recent seminar series.
Aisbett defined advocating on behalf of a client as situations where an auditor is in constant communication with the regulator asking for compliance enforcement leniency.
“So you’re demanding the ATO let the particular client off easy because they had this whole sob story as to why they took money out of their super fund. [In this situation] how is your independence looking?” she said.
She pointed out the tone of the correspondence with the regulator was most important in these circumstances.
“Just be really careful about how you word any correspondence if you are communicating with the ATO about a client matter,” she advised.
“Even if it’s on a no-name basis, you don’t want to be telling the ATO we think you should do the following because of this scenario.”
She suggested simply putting the client’s circumstances forward as a question might allow auditors to avoid advocacy risk.
“Ask what would the ATO like to see in this scenario. Put the question to the ATO, but don’t dictate what you think the ATO should say,” she said.
“Then you’d be avoiding straying into that advocacy situation.”
With regard to the wider concept of auditor independence, she noted ASIC has said consideration needs to be given to this issue throughout an audit.
“[So] not just at the start and not just as a fleeting thought at the very end,” she said.
ASIC recently banned four SMSF auditors as a result of significant independence breaches.
