AAT, ASIC, Auditing

Auditor disqualification upheld

SMSF auditor Disqualification ASIC Independence standards

An SMSF auditor has failed to have her disqualification for breaching independence standards overturned by the AAT.

The Administrative Appeals Tribunal (AAT) has affirmed an Australian Securities and Investments Commission (ASIC) decision to disqualify an SMSF auditor for breaching independence requirements.

The AAT made the ruling in the case of Townshend and Australian Securities and Investments Commission [2023] on 23 November in relation to an appeal made by the applicant to contest the disqualification imposed by the corporate watchdog.

Specifically, ASIC disqualified Janette Townshend of Templestowe, Melbourne, in August 2022 from acting as an approved SMSF auditor because she undertook audits of the Slaverio superannuation fund, of which her husband was a member and a director of the fund’s corporate trustee, during the 2015-2020 income years.

Townshend subsequently applied to the AAT on 15 November 2022 for the disqualification to be reviewed, with her legal counsel confirming the applicant acknowledged she had breached the independence requirements.

The applicant argued disqualification was an overreaction to what was simply a misunderstanding on her part and sought to have conditions imposed on her registration instead.

AAT deputy president Bernard McCabe acknowledged Townshend had not wilfully disregarded the auditor independence standards set out in APES 110 Code of Ethics for Professional Accountants as required by section 128F(d) of the Superannuation Industry (Supervision) (SIS) Act.

McCabe also stated there was no evidence to suggest she failed to conduct the audits appropriately or that she or her husband derived any advantage from the auditing practices.

However, he said “the importance of the audit independence requirements means that disqualification is the appropriate response” and ruled to affirm ASIC’s original decision.

“The applicant’s failure to appreciate there was a problem with undertaking the audits over several years is itself a matter of real concern. She should have known better and the fact she did not raises questions about her judgment,” he stated.

“There is no doubt Ms Townshend was in breach of the audit independence requirements when she audited the Slaverio superannuation fund in respect of the 2015-2020 income years.

“She did not comply with a condition of her registration and she also failed to comply with a duty imposed on her under the SIS regime. That essentially uncontested finding enlivens the discretion in section 130F of [the] SIS [Act] to disqualify her or suspend her registration as an approved SMSF auditor.

“Suspending or disqualifying Ms Townshend would send a clear message to the rest of the audit profession that independence is crucially important. The need for general deterrence makes that essential.”

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