Audit firms are highly unlikely to be able to use the routine and mechanical provision in the new auditor independence standards as an exemption when auditing SMSFs their firm has also prepared financial statements for, an SMSF audit expert has said.
BDO Australia partner Geoff Rooney said auditors would find it extremely difficult to use routine and mechanical as an exemption in the context of the restructured APES 110 Code of Ethics for Professional Accountants in order to audit an SMSF where they, their staff or their firm has also prepared the financial statements for the fund.
“The starting premise is that it would be unlikely that a client would be availing themselves of that routine and mechanical exemption,” Rooney said today during a webinar hosted by BDO Australia, Class and Cloudoffis.
“If a client has the requisite knowledge and skill and understanding to be responsible for all of the general ledger and coding all the transactions, and responsible for all of the underlying financial data, the question that would arise [is]: why are they working with an accounting professional?”
In order to prove a service was “routine or mechanical in nature”, according to the recently restructured code, auditors would have to provide evidence that SMSF trustees had taken responsibility for their fund’s financial statements and had sufficient knowledge, skills and experience to do so, he pointed out.
“Really, as an administrator, as an accountant and as an auditor, you’d have to be comfortable that you could evidence that the client [is] really just using you as a book-keeping role to prepare the accounts, but that’s all,” he added.
“It’s a fairly high bar to be covering and so I don’t think that the reality is that people would say routine and mechanical is an effective get-out-of-jail-free card to keep doing what people are currently doing.”
Earlier this week, the ATO said data feeds could not be used as proof SMSF financial statements had been prepared by an accounting firm in a routine and mechanical way in the context of the new auditor independence standards.
In July, ATO SMSF auditor portfolio director Kellie Grant said auditors needed to factor in recent changes to the Code of Ethics for Professional Accountants to ensure they were not in breach of new independence standards.