News

ATO, Auditing

Audit termination doesn’t negate need for ACR

Audit terminated ACR

SMSF auditors must still lodge an ACR where required even if a fund trustee has terminated the audit arrangements, the ATO has warned.

SMSF auditors have been reminded they are still obligated to complete an auditor contravention report (ACR) where required even if their audit engagement has been terminated before the finalisation of the audit.

The reminder was given by the ATO via an online update, in which the regulator also highlighted that an ACR should be filed where the audit engagement was terminated by a client because the auditor identified a contravention.

In issuing the reminder, the ATO noted section 129 of the Superannuation Industry (Supervision) Act 1993 requires auditors to notify fund trustees in writing and file an ACR if they form the view a contravention of the act has occurred, and this obligation cannot be terminated.

“Auditors are reminded these reporting obligations exist from the time the auditor is appointed by the SMSF trustees to undertake the annual audit of the fund’s operations, and do not cease simply because an audit engagement is terminated early. This applies whether the engagement is terminated by the trustees or the auditor,” it stated.

“This means if an auditor is appointed to audit an SMSF, and they identify a contravention in the course of undertaking that audit, but their engagement is terminated before they finalise the audit (and give the trustees a report on the fund’s operations), the reporting obligation still exists.”

It added that in lodging an ACR, auditors had two channels in which to raise issues, stating that if a contravention met the reporting criteria it should be reported in the ‘Contraventions’ section (section E) of the ACR, and where it did not meet the criteria it could be reported under the ‘Other Regulatory information’ section (section G).

While reporting in this latter section was not mandatory for SMSF auditors, the ATO stated it provided an opportunity to tell the regulator about any additional concerns about a particular fund and its trustees and would assist the ATO in performing its functions as the SMSF regulator.

“These concerns might include where a client has terminated an audit engagement because a contravention was identified. We encourage auditors to report this type of conduct to us at section G so we can consider whether any compliance action needs to be taken against the fund,” it said.

Copyright © SMS Magazine 2021

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital