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ATO, Auditing

Independence certainty impossible

auditor independence guarantee

The ATO has said it cannot guarantee any arrangements implemented by accounting firms will be compliant with the amended auditor independence standards.

The ATO has stipulated it can only provide the type of guidance it has already released to the industry as opposed to any guarantee pertaining to situations relevant to the auditor independence standards contained in the amended version of APES 110.

“Unfortunately we can’t provide certainty about proposed arrangements [aimed at complying with the revised independence standards] in the absence of a complete analysis of the facts and circumstances of the particular engagement,” ATO SMSF auditors portfolio director Kellie Grant said at the recent SMSF Virtual Day 2021 hosted by Smarter SMSF.

“We’re only likely to undertake that sort of analysis when we do our compliance reviews, so we really do rely on you, with help from your professional associations, to have a look at your current arrangements and work out whether you are complying with the code.”

Grant pointed out there are, however, some unambiguous rules that must be obeyed, such as an auditor being unable by law to audit an SMSF in which they are a trustee or member.

To this end, she revealed the Australian Securities and Investments Commission (ASIC) is still awaiting a ruling on its appeal against an Administrative Appeals Tribunal’s (AAT) decision regarding this restriction. In this instance, the AAT chose to reinstate a practitioner’s approved SMSF auditor status after he was originally found to have breached APES 110 requirements.

“We all know you can’t audit your own fund, but it’s interesting because you may recall there was an auditor, Mr Gilliland, who received a favourable decision last year from the AAT where they set aside ASIC’s disqualification against him because he’d audited his own fund and that of his immediate family members, being his wife and daughter,” Grant said.

“[In this case] the AAT actually accepted the auditor had made an honest mistake when he reduced his financial interest in the fund from $24,000 to $3000, [leading him to believe] by having an immaterial interest in that fund he could still audit it.

“ASIC has obviously appealed that decision to the Federal Court this year, so it will be interesting to see what comes out of that.”

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