Auditors following independence standards

SMSF auditors independence

SMSF returns are showing auditors have complied with independence standards and are moving away from prohibited behaviour.

SMSF auditors are generally complying with the independence standards and are changing their auditing relationships, according to the ATO.

ATO SMSF auditor and portfolio director Kellie Grant said the regulator was increasing its focus on the compliance of SMSF auditors after the COVID-19 lockdowns of 2020 and 2021 and was particularly looking at compliance with independence standards released in March 2021.

“The restructured code of ethics and guide make it clear that firms who provide both accounting and auditing services can only do so in very limited circumstances,” Grant said at the recent Self-managed Independent Superannuation Funds Association Annual SMSF Forum in Melbourne.

“We have started to see a shift in industry restructuring in the returns that have been lodged with the ATO so far.

“We have not seen the bulk come in yet because that will be in May and June, but for those that have come in so far we are seeing a shift in auditors or a different auditor has been auditing those funds and we believe that might be the result of independence standards coming into play.”

She reminded SMSF auditors they should be using the most up-to-date version of the SMSF independent auditor’s report and the ATO was tracking those firms that continued to ignore the new independence standards.

“Our compliance approach relies on data and intelligence to identify, risk assess and deal with those higher-risk firms who look like they are continuing to provide in-house audits or involved in reciprocal auditing arrangements, or have a high percentage of fees from a single referral source,” she said.

“Over the next 12 months, the program of work is expect to deliver increased visibility on how we’re working with ASIC as co-regulators, as well as to address inappropriate behaviours.”

As part of this work, she pointed to two instances where ASIC took action against 18 auditors for reciprocal arrangements and 19 auditors for failing to do a proper and adequate audit or failing to meet the fit and proper person test.

“I want to point out that what we identified as common issues in those audit files is that auditors are not obtaining sufficient evidence they need to be able to demonstrate how they form their opinion both in relation to the financial and the compliance audit,” she said.

“We are also not finding enough in the way of evaluation notes on the file to show how auditors have evaluated the evidence they obtained in forming their opinion.”

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