The new auditor independence standards will reinforce the essential role SMSF auditors have in protecting the retirement savings of trustees and maintaining the integrity of the sector, a major accounting body has said.
Chartered Accountants Australia and New Zealand (CAANZ) reporting and assurance leader Amir Ghandar said few trustees had the expertise or inclination to play a major role in the operation of their SMSF and tended to place their trust in accountants and advisers.
Ghandar said the restriction, under the restructured APES 110 Code of Ethics for Professional Accountants, on financial statements and audits being prepared by the same party would reinforce the important role auditors played in protecting trustees’ retirement savings.
“The independence is essentially so that the [SMSF community’s] stakeholders and, of course, first and foremost the SMSF trustees have confidence they’re being served objectively and that [the audit is] a true line of defence beyond other advisers that are involved,” he said last week during a CAANZ webinar.
“From the perspective of an accountant working on the administration side, the independent audit does provide us with a level of integrity and rigour to the process.”
He noted enlisting the services of an auditor was sometimes seen as a “grudge purchase” by trustees who felt getting their fund audited was no more than a legislative requirement necessary to receive tax concessions.
Given the impact a badly managed fund could have on trustees’ retirement savings, he said increased independence could prove helpful in helping to shift this view of SMSF auditors for trustees.
“[Audits] are the last line of defence or the ultimate line of defence when it comes to [trustees] having integrity around their retirement savings. The stakes can’t be higher than that,” he added.
“When everything’s working well, then it’s easy to look past the fact that’s really the central reason for this role. You can confuse it sometimes with mainly a compliance role aimed at reporting to the ATO.
“Ultimately, it really is there for the benefit of the trustees – they are relying on this to [provide] that second pair of eyes and rigorous testing around their retirement savings.
“I think where we would like to get to in meeting the independence requirements and placing value on [the auditor] role as a profession is a place where [the audit process] is not a grudge purchase – where trustees can understand and get real value out of the process in terms of satisfying themselves as to the integrity of their life savings.”
Last week, the ATO stated it would not be enforcing the new auditor independence standards for the 2021 financial year and would instead allow a transition period for accounting firms and auditors to adjust to the changes.
Earlier this month, the regulator cautioned practitioners looking to establish a breakaway company to continue to perform SMSF audits for clients serviced by their former employer that such a move was unlikely to be considered a successful strategy to adhere to the new auditor independence standards.