Accounting, Auditing

ATO to ask for auditor independence proof

trustees auditor independence

SMSF auditors completing an in-house audit will need to prove their firm had no role in the oversight of the fund and trustees were solely responsible.

The ATO has reminded SMSF auditors conducting an in-house audit they will be required to provide clear evidence their firm took no management responsibilities for an SMSF and can prove the fund trustees were responsible for its oversight and direction under auditor independence standards introduced this year.

Speaking during a recent webinar, ATO SMSF auditor and portfolio director Kellie Grant said the regulator will be monitoring auditor compliance with independence standards and looking for documentation to support that compliance.

“For those firms who think they can continue to provide in-house audits after the 1 July 2021, we will expect to see the following on the auditor’s file, and that’s evidence that the auditor was satisfied the firm did not assume any management responsibilities for the SMSF, [and] evidence that the trustee had the relevant skills, experience and knowledge to take responsibility for the preparation of the financial statements,” Grant said.

She advised auditors to not solely depend on a trustee’s signature on financial statements or the signed trustee representation in order to evaluate whether the trustee has undertaken their fund responsibilities.

The ATO would also take steps to confirm what actions had been undertaken by the trustee where an SMSF firm claimed it was not involved in the management of the fund.

“[The ATO] will be checking the auditor’s opinion has been appropriately formed by asking the firm to confirm whether it has assumed any management responsibilities for the SMSF in providing them non-assurance services,” she said.

“If the firm claims they haven’t assumed any management responsibilities for the SMSF audit client, then we will request evidence that the trustees have remained responsible at all times, the trustees have made all relevant decisions and judgments in managing their fund, and that they have the skills, knowledge and experience to do so.

“This may lead us to contacting the trustees directly to verify the management responsibility rule has been complied with.”

During the same webinar, Grant emphasised that where an SMSF accounting firm provided auditing and assurance services to an SMSF, even low-level management responsibilities offered to a fund would be considered as not adhering to a separation of services and counter to auditor independence standards.

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