While auditor independence is not covered by SIS Regulations, the ATO does have the power to disqualify auditors over independence issues and is likely to use this power as the ATO refocuses its attention on the issue.
Super Sphere principal Belinda Aisbett said auditor’s independence is once again a hot issue for the SMSF industry and requires careful management and consideration.
“I don’t think there is anyone out there who doesn’t have an independence problem at all,” Aisbett told SPAA delegates.
The key to managing independence issues it is to have a checklist so these issues can be identified in a timely manner and duly managed, she said.
“At the end of the day auditors don’t sweep things under the carpet. They don’t pretend things haven’t happened,” Aisbett said.
Super Sphere provides auditing and training services to auditors. According to Aisbett, the ATO’s refocus follows the dismal results from its own research which reviewed the practices of the “worst of the worst” auditors.
The research found that 28% of auditors didn’t check the definition of a SMSF, and 23% failed to check whether a SMSF has satisfied the sole purpose test.
Although 26% of auditors didn’t check compliance with investment restrictions, of the 74% that did check, 64% of the contraventions were not identified.
Aisbett supported the useful guidance of a CD recently issued by the Institute of Chartered Accountants on the issue of auditor independence. It includes recommendations such as where accounts are being prepared by the auditor and there is no separate partner, that the audit be declined.
Further, where the trustee is in a business or family relationship with the auditor, the audit is also declined.
Another change to be introduced to the auditing industry following the passing of the Simplified Superannuation reforms is the removal of an auditor’s professional judgement in deciding whether certain issues affect the interests of fund members or beneficiaries.
This means auditors will now be required to report to the ATO on matters it specifies in a particular form.
Aisbett said while these matters are yet to be decided, the change makes sense because of the natural range in professional judgement.
