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Audit independence deadline unlikely to move

Audit independence deadline

SMSF auditors will have no excuse for not having complied with new independence standards by mid-2021 despite the volume of work that will be required, an SMSF lawyer has claimed.

SMSF auditors preparing for the introduction of new audit independence standards should not rely on the ATO offering an extension beyond the middle of next year as they have had sufficient time to meet the compliance deadline, an SMSF legal expert has warned.

DBA Lawyers principal Daniel Butler said while the expected number of SMSFs that will need to move auditors under new independence standards that took effect from 1 January was estimated to be 200,000, the ATO was unlikely to extend the deadline at which it will start enforcing compliance with the measures.

Speaking during a DBA webinar today, Butler pointed out the new SMSF auditor independence standards, which are part of the revised APES 110 Code of Ethics for Professional Accountants, were released in November 2018 and became effective from January this year.

“While it is effective now, and strictly speaking auditors should already be complying with it, there is a position within the ATO that they will not apply compliance resources,” he said.

“There is no formal practical compliance guideline, but the ATO is not going to force the issue with auditors until July 2021.”

He said he had been asked whether it was it reasonable to expect compliance by the middle of next year, given the number of funds that will have to move auditors and the number of accounting and audit firms that will have to restructure to meet the standards.

“I have heard this question from a few firms asking if there is going to be any delay. Don’t hold your breath,” he said.

“The word is they [the ATO] are sticking to that rule so don’t expect an extension.

“In the past what generally happens, if there is going to be an extension, and if there is enough jumping up and down by professional associations and complaints to the ATO and Treasury, then under a lot of protest by the professional bodies, there may be some respite, but don’t hold your breath this time.

“Don’t what until the eleventh hour because they will say you have been on notice since November 2018 and have been told to get ready, so this is not news that has come out overnight.”

He noted any outstanding SMSF audits will also come under the new standards from mid-2021, regardless of what financial year they originate from.

“From that date all future audits must comply with the code, that is, all SMSF auditors must be independent,” he said.

“Let’s say you have a fund with outstanding returns and financial statements and it’s beyond 2021. Even though those past statements and audits need to be cleared, and may relate to 2016 onwards, they are going to need to comply with the code from 1 July 2021 as well.”

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