A push to have acceptable limits on a fee generated from one referral source stipulated in APES 110 before an auditor independence threat is triggered is already underway and could be written into a draft version of the code of ethics for accountants as soon as next month.
APES 110 currently does not specify the number of referral sources or the set percentage of fees from one or more referral sources of clients auditors must not exceed to keep any potential independence threats to an acceptable level.
To compensate for this omission in the accounting code of ethics the ATO has produced its own guidance confirming it is not likely to consider there to be a fee dependency issue if the fees generated from the one referral source are less than 20 per cent of the firms total fees.
However, during her presentation at the SMSF Virtual Day 2021 hosted by Smarter SMSF, ATO SMSF auditors portfolio director Kellie Grant revealed the process to change this situation is now in progress.
“In order to try and make the 20 per cent benchmark for referral fees easier to administer the ATO has requested the APESB (Accounting Professional and Ethical Standards Board) to insert that rule into the code as a requirement,” Grant explained.
“So the APESB and ASIC (Australian Securities and Investments Commission) have approved the inclusion of that rule in the next draft version of the code as well as a rule we’ve recommended [dealing with] a referral source that represents more than 20 per cent of the total fees of a partner or office of the firm,” she added.
“And those new rules are likely to be published in a draft version of the code that will be issued for public consultation in May this year.”
According to Grant, if APESB eventually gives its approval for the aforementioned rules to be included in the code after the consultation period is finished, the amendments would not come into effect until 1 July 2023.
The amended auditor independence standards is a topic that will be covered in more detail at the SMSFPD Digital 2021. To find out more and register for the event please visit https://web.cvent.com/event/1432890d-987b-46a3-970a-5d8043c4258f/summary?RefId=Summary