SMSF auditors conducting an in-house audit based on the fact non-assurance services provided to the same client are of a routine or mechanical nature are unlikely to find that is an acceptable position under the relevant independence requirements, a specialist practitioner has noted.
Auditors Institute South Australian director Steven Russo said there was almost no circumstance where this arrangement would be viewed as consistent with the independence obligations outlined in the APES 110 Code of Ethics.
Speaking during a recent online briefing hosted by the institute, Russo gave the example of an accounting practice with 100 staff that had both an administration and audit arm.
“On the administration side, the data is fed in via bank data feeds and all that has been done is the year-end general ledger, reconciliations and general journals. There is also a set of financial statements and I am auditing that within the same firm,” he said.
“In those particular circumstances, and I have been through this in my own firm and seen this elsewhere, you still cannot demonstrate or be able to prove that there was only routine and mechanical things that have been done.
“The journals will still need to be made and the general journals will not be able to be sent or approved by the trustee.
“The rules are very strict, but that’s the example the APES 110 uses.”
He emphasised even low-level routine or mechanical actions would still be a problem under the independence requirements.
“Again, APES 110 goes on to prescribe that if you are coding bank statements and things of that nature, then those codes need to be predetermined by the SMSF trustees or members to be fully compliant with what the code prescribes,” he said.
“So it is force of law and there is no grey area here. To be 100 per cent sure, if you are in that circumstance, then you would not be permitted to sign off on that audit and I would deem that to be an in-house arrangement.”
