Caddick case not just lesson for auditors

SMSF auditors Melissa Caddick ASF Audits

The Melissa Caddick case highlights the importance of SMSF practitioners thoroughly checking the documents they receive from existing and potential clients.

A technical specialist has urged SMSF practitioners to carefully scrutinise documents received from clients in the aftermath of the Melissa Caddick case.

Commenting on a recent class action lawsuit brought by the victims of Caddick involving 24 SMSFs and five SMSF auditors, ASF Audits head of education Shelley Banton noted the case provided some valuable lessons for all SMSF practitioners.

“It’s claimed that the auditors allegedly failed to confirm that the assets were held by the funds, failed to confirm that they existed and failed to identify that the documents were fraudulent,” Banton told attendees of a recent ASF Audits webinar.

“Allegedly the auditor didn’t verify the investments, which were held on a fake CommSec platform. So [this is] a reminder for everybody in the SMSF process to check all your documents, be very vigilant about who you’re working with and who’s handling your money.

“If it seems too good to be true, well, then it probably is. And unfortunately, as I said, it won’t be the last auditor case we see.”

While she acknowledged the auditors who were responsible for overseeing the audit of fraudulently prepared documents should be held to account, she pointed out there were opportunities to identify potential compliance issues before reaching the auditing stage.

“Obviously, keeping auditors to task and making sure they’re responsible for their work is correct [in order to] hold them to higher standards, but I do think they’re not the only ones responsible for what happened to the Caddick victims,” she said.

“One of the comments I read in the media was that this could all have been avoided if the SMSF auditor had checked the Australian financial services licence (AFSL) number. Now, unfortunately, that’s not part of our terms of engagement with trustees.

“Certainly pointing the finger at the auditor is one thing, but there’s a whole lot of other people in the SMSF food chain that could have, and possibly should have, checked the AFSL number before it got to the auditor and before the Australian Securities and Investments Commission (ASIC) caught up with her.”

The 49-year-old Caddick vanished from Dover Heights in Sydney’s east in November 2020 a day after ASIC and police raided her home on the suspicion she had misappropriated around $30 million from investors through a Ponzi scheme.

Three months later her severed foot washed up on a New South Wales south coast beach. In May this year, a NSW coroner declared her dead, but was unable to provide a cause of death.

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