Auditing, Documentation

Data feeds not an auditor independence exception

data feeds auditor standards

Data feeds can't be used to prove SMSF financial statements have been prepared in a “routine and mechanical” under new auditor independence standards.

Data feeds cannot be used as proof SMSF financial statements have been prepared by an accounting firm in a “routine and mechanical” way in the context of the new auditor independence standards, the regulator has said.

The ATO has stipulated the preparation of SMSF financial statements using automated data feeds will not meet the definition of administration services that are of a “routine and mechanical” nature introduced in the latest amendment to APES 110 with regard to auditor independence standards.

Further, the regulator confirmed the preparation of accounts for an SMSF holding simple investments, such as direct equities and cash, cannot be considered “routine and mechanical’ either.

ATO SMSF auditor portfolio director Kellie Grant noted the logic being in both situations the preparation of financial statements would not require an accountant to exercise any level of professional judgment.

“The key thing is the trustee still needs to show they’ve taken on the responsibility for these financial statements by pre-approving every super fund transaction and the appropriate account classification for that transaction rather than looking to approve them after the fact,” Grant explained during a CPA Australia podcast.

She added the implementation of data feed use is already often problematic from an independence perspective.

“We often find the [accounting] firm is also responsible for setting up the accounting software which classifies the transactions from the data feeds,” she said.

“And of course we all know mistakes can still be made in those data feeds that normally the [accounting] firm takes responsibility for rather than the trustee.”

According to Grant, the role SMSF administrators play in reality precludes any of their work from being considered “routine and mechanical”.

“We often do find though that the SMSF administration firm who prepare the accounts for funds, even [using] data feeds, are still in fact making decisions on behalf of the fund, such as devising certain tax strategies for the fund or helping [the trustees] with compliance,” she said.

“For instance, a lot of those firms might advise on how a trustee can go about maximising their concessional and non-concessional contribution limits, or they might advise on the best time for the trustee member to commence a pension.”

She noted it is these types of activities that would bring the firm’s audit independence into question should it perform this function for the fund as well.

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