Auditing, Tax

Tax agent/auditor role unclear

Tax agent SMSF auditor

It remains unclear whether a practitioner can act in the capacity of tax agent and also auditor for an SMSF, a sector specialist has said.

The legitimate ability of a practitioner to act as the tax agent and also perform the audit for an SMSF under the amended auditor independence standards is yet to be definitively determined, an industry specialist has said.

The issue is one being commonly raised and refers to a situation where the individual in question is the tax agent for an SMSF and lodges the tax return for the fund, but does not prepare the fund’s financial statements.

“We’re not too sure about what the situation is here. The tax agent can actually be the SMSF auditor, that has been said. But there’s a big but here [and that is whether] the tax agent as the auditor is providing any other tax services [and] are they providing any sort of advice,” ASF Audits head of education Shelley Banton said during the latest Accurium technical webinar held today.

“[Is the tax agent] liaising with whoever is preparing the financial statements and providing advice here or is that effectively just between the trustee and the preparer of the financial statements?”

According to Banton, the situation is difficult and intricate with many factors needing to be examined before knowing whether auditor independence can be established.

“What happens if the tax calculation is material? Is the auditor then auditing their own work or are they applying a safeguard and getting an independent reviewer in to have a look at that?” she said.

“It can work, but there are a lot of mitigating circumstances there.”

Accurium head of education Mark Ellem said establishing which practitioner calculates the provision for tax in the SMSF’s financial statements could be the determining factor.

“The final set of accounts has got to have a provision for tax in it, but whether you need the tax return prepared to [calculate] the tax [is a significant factor],” Ellem said.

“It could potentially be a case of … the auditor, who’s also the tax agent and prepares the tax return, assesses their calculation of the provision for tax and says ‘that’s right, I agree with it’.”

Banton’s conclusion is the scenario raises more questions than provides answers.

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