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Limits to sources of audit fees defined

Independence audit fees

The level of SMSF audit fees from a single source that will be considered a threat to independence has been spelt out by the APESB.

Provisions that dictate the level of audit fees an SMSF auditor can receive from one source without threatening their independence have been released for consultation by the Accounting Professional & Ethical Standards Board (APESB).

The APESB released the proposed amendments to the fee provisions contained within the APES 110 Code of Ethics for Professional Accountants late last month, with the ATO calling attention to them in an update on its website today.

The regulator noted the proposed amendments “provide additional guidance to firms on evaluating and addressing independence threats created when fees are negotiated with and paid by an audit client, and those created by the level of fees, proportion of fees from non-audit services, and fee dependency”.

The amendments would also introduce a rule for assessing fee dependency where multiple audit clients were referred from one referral source.

In the exposure draft of the amendments available on the APESB site, section AUST R410.14.1 stated the threshold for a threat to audit independence would arise when the total fees in respect of multiple audit clients referred from one source represented more than 20 per cent of the total fees of the firm, partner or office of the firm.

As a result of this, “the [audit] firm shall evaluate the significance of the threat and apply safeguards when necessary to eliminate the threat or reduce it to an acceptable level”, the draft stated.

The ATO recommended SMSF auditors review the amendments, which are slated to take effect from 1 January 2023, and provide comments to the APESB by 31 August 2021.

The 20 per cent threshold had already been identified by the ATO in April this year as the limit at which it considered threats to independence may occur and it had requested the formal inclusion of that figure into the fee provisions of the code.

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