SMSF auditors who carry out more than 250 audits a year may need to prove how they do this work to a high standard after a recent case before the Administrative Review Tribunal (ART) questioned what an acceptable workload is for such practitioners, a lawyer has noted.
DBA Lawyers special counsel Bryce Figot said in the case of Islam and ASIC (2024) ARTA 88, the ART questioned whether MD Nazrul Islam could have carried out nearly 300 audits in 2019/20 when there were only 250 working days in that financial year.
The tribunal heard the case after Islam was banned by the Australian Securities and Investments Commission (ASIC) from acting as an SMSF auditor in February 2024 following a review of three audit files. He appealed that decision in April 2024, but in December the ART upheld ASIC’s decision to ban him for failing to satisfy the relevant auditing standards on three files.
While the ART ruling did not mention the number of audits performed by Islam in a single year, it did question the ability of an auditor to carry out a high number of them to an appropriate standard.
“What is the maximum number of SMSF audits that an auditor can ‘prudently’ perform per annum according to the ART?” Figot said in a recent webinar where he ran a poll of attendees in which 70 per cent stated 250 to 500 audits was acceptable.
“The ART did not give us an exact number. Everyone who said 250 and above – according to the ART and they didn’t cite any evidence – it is probably too high.”
He noted Islam stated he performed 296 SMSF audits in the 2020 financial year and 386 the following year, and the ART responded that with about 250 working days in each of those periods, he must have completed more than one audit per working day.
Ruling on the case, ART general member Joanne Dunne stated: “While I accept that many SMSF audits may be simple, I do not believe that level of SMSF audit workload for one person is particularly prudent. It may cause corners to be cut.”
Figot added: “So doing 296-plus audits is not prudent, according to the ART, but I think there’d be a heck of a lot of auditors doing more than that volume.
“So I want to emphasise that because I think there would be a lot of auditors that audit in excess of 250, 500, 1000 files and it’s probably still the maximum of prudence.
“Sometimes you need a circuit breaker to think how will this look if it comes before the ART. I was very surprised to see that comment, but you just never quite know how things are viewed.”
Recent statistics released by the ATO found around 330 auditors review more than 250 funds per year and around 820 audit up to 250 funds a year, with those numbers being relatively static for the past five years.
