ATO, Auditing, Compliance

Auditor independence still targeted

SMSF auditors independence ATO

The ATO has identified a number of auditors who are still failing to meet independence requirements and will engage in targeted reviews and compliance action.

SMSF auditors are still failing to meet the independence requirements that commenced more than two years ago, with the ATO warning it is starting targeted reviews of those identified as not fulfilling these obligations.

ATO superannuation and employer obligations director Paul Delahunty said it was expected audit firms that had previously conducted in-house audits would have restructured to meet the independence requirements that came into effect from 1 January 2020 and apply to audits completed from 2021 onwards.

“Our process at the moment is we’re now enforcing compliance with the code for any audits completed on or after 1 July 2021 and this is irrespective of the income year to which the audits relate,” Delahunty said during a session at the recent SMSF Association Audit Day.

“In the last financial year we commenced some of this work and did have some referrals through to ASIC in relation to some findings.

“We are now ramping up that compliance action this year and expect to complete at least 60 reviews of auditors this financial year we believe are at risk of providing assurance and non-assurance services to trustees.

“Our strike rate so far has indicated that we’re having some issues in this space in relation to firms that haven’t restructured in line with the code, so there is still more to play out in this space and we will make some announcements in relation to what we are observing.”

He added auditors would be aware of the independence requirements set out in the APES 110 Code of Ethics for Professional Accountants and while in-house audits were not defined within the code, the conditions that created breaches of it were laid out.

“It is important to point out the term ‘in-house audit’ is not a defined phrase within the code, however, it’s commonly referred to situations where the audit of an SMSF is conducted by an auditor who works for a firm or network firm that provides assurance and non-assurance services to an SMSF trustee,” he said.

“This can be, for example, accounting, compliance and administration services and the failure to comply with the independence requirements is a breach of the SIS (Superannuation Industry (Supervision)) Act and Regulations.”

During the same presentation, he said the ATO had not seen a decline in the number of SMSF audits being completed despite a reduction in the number of practitioners, as those exiting engaged in a low level of audit activity.

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