The number of SMSF auditors referred to the Australian Securities and Investments Commission (ASIC) for compliance-related issues has marginally increased in the past year, with the ATO focusing on independence obligations introduced in 2022.
The ATO stated that in 2023/24, it had referred 45 auditors to ASIC, compared to 41 in the previous financial year, and the relative constant rate of referrals “reflects how we continue utilising data to ramp up our compliance actions to address auditor behaviours which put the SMSF system at risk”.
“In-house audit reviews were a major focus of our compliance work during the year, with 11 auditors referred to ASIC for failing to ensure that their specific arrangements complied with the independence standards as set out in APES 110 Code of Ethics for Professional Accountants,” it said.
“We also undertook compliance work focusing on auditors who have been in reciprocal audit arrangements, haven’t undertaken any audits in the last five years and are at risk of not holding appropriate professional indemnity insurance or having completed the required continuing professional development.”
As a result of this work, the regulator added the key compliance issues identified among SMSF auditors were breaches of the in-house audit independence requirements and failure to perform adequate checks or gather sufficient audit evidence for market valuations, the existence of assets, trustee declarations, borrowings and arm’s-length transactions.
The rules around auditor independence obligations continue to be an area of difficulty for some practitioners, with the ATO highlighting it would target its compliance actions in this area, which has resulted in a further 51 auditors choosing to voluntarily deregister following the start of that compliance campaign.
Earlier this year, ATO superannuation and employer obligations director Paul Delahunty stated the regulator had identified sole practitioner SMSF auditors were most likely to breach the auditor independence standards stipulated in the APES 110 code.
