The SMSF Association has confirmed recent events have shown there is an existing expectation gap as to how the ATO expects the audit process to be performed and what auditors are actually doing regarding this requirement for funds.
“As the number of auditor referrals to ASIC (Australian Securities and Investments Commission) continues to rise, it’s increasingly obvious that there is a misalignment between the ATO’s expectations and the practices of some in the industry, and it is something we as a sector need to work on to bridge the gap,” SMSF Association head of policy and advocacy Tracey Scotchbrook said.
Scotchbrook acknowledged the regulator’s commitment to publish more information to address the matter will be of great benefit.
“In our opinion, this will be greatly assisted by the ATO’s decision to release a series of articles to provide clarity to auditors,” she noted.
“Importantly, we expect future ATO articles to focus on specific compliance issues ATO officers have identified when reviewing SMSF auditors.
“It also reinforces the fact that a cursory review of an SMSF won’t meet the ATO’s expectations if the auditor is subject to a compliance review.
“This is not to say most auditors are not doing the right thing, but it is to highlight that if auditors want to prevent a referral to ASIC, they need to demonstrate that they follow a rigorous process that clearly documents and adequately supports their opinion.”
Specifically, she pointed out industry speculation is incorrect in relation to a change in approach from the ATO regarding auditor policing of whether there are any charges over SMSF assets.
“We have confirmed with the ATO that the commissioner has not made any changes to its view which aligns with an SMSF auditor’s obligations as set by the Auditing and Assurance Standards Board. The ATO’s recent statements in ‘Checking for charges over property assets’ (QC 73156) does not restrict an auditor applying their professional judgment or providing alternative evidence,” she revealed.
She noted actions available to auditors to meet this obligation to establish there are no charges over fund assets are limited, but can be satisfied by receiving written confirmation from trustees this is the case, performing a title search to check for encumbrances on real property or reviewing the Personal Property Securities Register for other parties registering interests against other SMSF assets.
Issues such as this will be addressed by the industry body’s SMSF Audit Day to be held virtually on 20 September. Visit https://www.smsfassociation.com/smsf-association-audit-day to register.