Auditors must immediately notify the ATO if a trustee attempts to influence the outcome of their fund’s audit, as failing to do so can lead to severe penalties, according to an SMSF lawyer.
DBA Lawyers special counsel Bryce Figot emphasised it is a requirement under the Superannuation (Industry) Supervision (SIS) Act for auditors to report any interference by a trustee to the regulator.
“Imagine you say to an SMSF trustee that you’re going to lodge an auditor contravention report (ACR) and they say: ‘I’m shocked at your egregious conduct. If you dare lodge an audit contravention report, I will sue you.’ Section 130BA [of the SIS Act] states you, as the auditor, have to notify the regulator,” Figot said.
“If you’re the auditor of a superannuation entity and you’re aware of circumstances that amount to an attempt to unduly influence, coerce, manipulate, mislead or otherwise interfere with proper conduct, you must notify the regulator as soon as practicable or in any case within 28 days.
“If you fail to do that, it’s an offence. You as the auditor can go to prison for 12 months or receive a penalty fine or both.
“That’s what it means to be independent and ethical. You’ve got to stand your ground and you’ve got some pretty harsh penalties if you fail to do so. If you do get pushed back on too hard, you’ve got to tell the ATO.”
Speaking during a webinar hosted by the Institute of Financial Professionals Australia yesterday, Figot also pointed out auditors could face legal consequences if they decide not to lodge an ACR after identifying a breach during a fund review.
“What happens if you put an issue in a management letter rather than lodge an ACR? You’ve probably made things worse for yourself,” he stated.
“Practice Statement Law Administration 2018/1 is internal guidance where the ATO is instructing its staff when to refer auditors to the Australian Securities and Investments Commission (ASIC).
“[In this document] the ATO says [if] it was identified during an audit that the auditor had formed the opinion that there was a contravention and although they told the trustee about it in the audit report, they hadn’t told the commissioner about it, [the auditor may be referred to ASIC].
“The ATO states if you know about [a potential audit issue], merely telling the trustee doesn’t inoculate you from risk, indeed it could get you into more risk. If in doubt, ACR it out.”
