ATO, Auditing, SMSF

No audit impact despite decline

SMSF auditors population completed audits

The number of completed audits has remained steady despite a reduction in the number of SMSF auditors as those leaving have been shown to have done minimal work in this area.

Changes to the overall size of the SMSF auditor population, including the mass cancellation of registrations earlier this year, have not dramatically changed the number of completed audits as those practitioners remaining tend to be the most active, according to the ATO.

ATO superannuation and employer obligations director Paul Delahunty said a reduction in the number of auditors driven by a number of one-off changes was not being reflected in the number of audited funds lodged with the regulator.

“Earlier this year there were changes implemented to reduce the Australian Securities and Investments Commission (ASIC) deregistration fee for auditors from $899 to $193. This change has facilitated an easier exit from the system for auditors who were providing minimal services or had ceased auditing entirely,” Delahunty said at the recent virtual SMSF Association Audit Day.

“Additionally, from 1 July 2021, our expectation was all audit firms that had conducted in-house audits would have restructured to meet the new independence requirements and, prior to this, we observed a rate of around 15 to 20 per cent of funds changing auditors annually.

“However, for 2021, we saw this rate increase to 32 per cent so it’s reasonable to assume the independence changes had some level of impact and influence over trustee and auditor behaviour.

“There has been a large number of auditors who exited the system as a result of these changes, but also through specific action ASIC took in January of this year to deregister 374 auditors who failed to lodge their annual statements.

“Our analysis has been able to tell us that despite those auditors exiting the system, there’s been minimal impact on audit completion as a result and that’s been due to the fact that a large proportion of those auditors had been very passive in relation to audit activity in recent years.”

He noted those auditors currently providing SMSF audit services were still engaged with the sector.

“There are some positive observations that can be made in relation to trends in the current population and, for instance, we now observe that 31 per cent of auditors have completed the ASIC exam, which is up from 27 per cent from the prior year,” he said.

“We have also identified that 78 per cent have an individual tax agent registration and over 97 per cent were a member of a professional association when they first became registered as an auditor.”

In its most recent licensing figures released today, ASIC stated there were 64 applications for SMSF auditor licensing during 2022/23, of which 44 were registered, 18 were withdrawn and nine were still pending at the end of the financial year.

The figures were released as part of “Report 772 Licensing and professional registration activities: 2023 update”, which stated the number of registered SMSF auditors at the end of June was 4410, down from 5173 in June 2022.

ASIC commenced registration of SMSF auditors from 1 January 2013 and at June 2013 there were 5935 registered SMSF auditors, with that number peaking at 7073 in June 2014 before it started to decline, falling to 6669 by June 2015 and below the 6000 mark at June 2019 when the regulator recorded 5917 auditors.

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