Specialist accounting software firm MyWorkpapers has developed a framework facilitating a client exchange program among SMSF accounting firms that could provide a solution allowing the retention of their auditing arms without breaching the amended auditor independence standards.
The MyWorkpapers model is one where the software provider acts as an independent entity that serves to introduce accounting firms providing the accounting and administration services for SMSFs, as well as auditing the funds, to other firms in a similar situation with the objective of having one firm taking over another’s existing audit clients.
“For example, a firm that is doing 100 audits currently and doing the administration of those funds currently, what we would do is introduce them to another party who would take on doing the audit of those 100 funds. Then, on the other side, we would introduce them to another firm that they would do 100 audits for,” MyWorkpapers Australian general manager Kevin Bungard told selfmanagedsuper.
“The point is that none of the firms involved in the relationship on the other side would know about each other; they’re independent and can’t form reciprocal arrangements.
“There’s a bit of work involved in that matching process and meeting all the compliance requirements, but essentially what we do is introduce them and leave them to their own devices in terms of ongoing relationships.”
According to Bungard, a further safety net has been included in the process to ensure the independence standards are not breached.
“We also have the requirement that when we introduce you to someone, if you know for some reason that you can’t work with them because maybe they’re in the same dealer group or maybe some other commercial arrangement would make that relationship non-independent, you have to tell us and we’ll introduce you to someone else,” he noted.
Firms agreeing to the arrangement must also commit to servicing the entire number of funds for which the counterparty firm is conducting the annual audit.
Bungard noted MyWorkpapers allows the individual firms to determine if the arrangements resulting from the introductions breach the independence standard of having a partner derive too much revenue from one source and make any necessary adjustments.
He sees the framework as an alternative to pooling arrangements as it does not fit the definition of a network and as such will allow the requirements of APES 110 to be met.
“In order for it to be a network, in terms of the definition under the guide, there has to be a commercial relationship between the auditor and the accounting firm and the fact we’re an independent agent making introductions and are not party to the ongoing engagement,” he said.
“So we have no part in the relationship that they form going forward.”
MyWorkpapers has presented the scheme to the ATO and the regulator did not have any objections to the initiative, he pointed out.
The initiative has been offered to MyWorkpapers clients in the first instance with a view to offering the introduction services to a broader range of accounting practices in February.
The difficulty pooling arrangements pose with regard to the auditor independence standards has previously been discussed by other sector stakeholders.