Audit lessons from Caddick case

smsf auditors caddick

SMSF auditors must heed the lessons that have emerged from the fraudulent activities uncovered in the well-publicised Melissa Caddick case.

A specialist practitioner has reminded SMSF auditors of the critical lessons the profession needs to learn from the high-profile Melissa Caddick fraud case.

Speaking at the SMSF Auditors Association of Australia SMSF Conference 2022, LDB superannuation principal Rohan Mansfield said: “Maybe it’s always been the case. But [the Melissa Caddick situation] is really highlighting if an accountant or a trustee is giving you paperwork, can you rely on it. Can you just rely on a CommSec report or a bank statement because the auditors are all given this type of paperwork?”

Mansfield noted in the Caddick case both the CommSec and the bank account did not exist, thus SMSF auditors cannot accept these types of documents on face value.

“What could the auditors have done [to] resolve this issue? They could have verified one of the shares [on the CommSec account]. I’m not up here saying you’ve got to verify every single share, but if one share had have been verified straight away, it would have highlighted there was a problem,” he noted.

According to Mansfield, the perpetration of fraud has become easier with technological advancements. However, auditors should also look toward them to decrease their own professional risk.

“[We’re now able to] check the data feeds, if [the practitioner is using] Class or BGL, [so] let’s have a look at the feeds to see if they’re working correctly,” he said.

“So it’s really important, going forward, that we try to get independent confirmation of investments [instead of] relying on paperwork that we get from an accountant or a trustee.”

He pointed out the case also indicated auditors cannot believe information is genuine based on timely processes either.

“[In one client’s circumstances] she seemed to be relatively up to date [with the required reporting]. The 2020 accounts were done by 25 August 2020,” he noted.

“She [got] everything done on a timely basis. Maybe that gave the impression that she was organised and everything was legitimate.”

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