Partial outsourcing of the SMSF audit function is emerging as a solution for accounting firms looking to comply with the amended auditor independence standards as defined in APES 110 without eliminating valued staff members from the practice, a sector specialist has said.
“We’ve certainly had a number of conversations with colleagues who are saying: ‘Look, I have spent a lot of time training up my audit staff. They’ve got a lot of knowledge, they’ve got good rapport in the office, we don’t want to let them go.’ Especially if [they only perform] SMSF audit, they really won’t have a job come 1 July,” Super Sphere director Belinda Aisbett told delegates at the recent SMSF Association Virtual Technical Summit 2021.
The aim to retain audit staff has led to arrangements where the existing practitioners within the firm continue to prepare the audit file, but then send the completed file to another firm for review, Aisbett noted.
“[For example, they would then] send that audit file to me, I review it and make sure it’s in line with my standards and my expectations, and then I’m the one that ultimately signs off and takes responsibility for it,” she said.
“So that is an option I guess. I certainly don’t see that there would be any independence threats as long as you, the [practitioner] signing it off, you’re actually reviewing the file [the other firm’s] staff has prepared to make sure it’s in line with your standards and requirements.”
She also took the opportunity to alert accounting firms to the fact that any audit outsourcing arrangement will have workflow implications.
“As an auditor who gets their referrals from other sources, I’m at the mercy of everybody else. I can’t say to my accountants: ‘Oh, I don’t have much on today, can you send me a couple of audits.’ I don’t get that luxury,” she said.
During the same presentation, she highlighted other practice management risks that may arise from pooling arrangements.