Self-managed superannuation fund (SMSF) auditors should be aware of the five most-dangerous threats to their independence, as identified by BDO director of superannuation Shirley Schaefer.
"Auditors need to be independent from their SMSF client not just in mind but also in appearance," she told delegates at the Self-managed Super Fund Professionals' Association of Australia (SPAA) conference yesterday.
"Firstly, there's the self-interest threat - and that's the threat to your hip pocket. That's the one that says I'm not going to qualify your audit report, because if you take all those audits away from me I'm going to lose fees. It's a fairly persuasive threat, so auditors need to be very careful and monitor that they don't have that threat."
Another risk to an auditor's independence is the self-review threat, said Schaefer. "It's the one that says you can't audit your own work, because you've already prepared the underlying documentation that goes with it.
"The familiarity threat is another, and it's probably the one that auditors can get out of the least. It's the one that says you shouldn't be auditing your brother or sister's SMSF, and I'd even extend that to in-laws and other familial relationships.
"The advocacy threat is the one that relates to a practice or a firm in that someone else within that firm, not necessarily the auditor, has advocated a particular position or advocated that something will comply with SIS [Superannuation Industry Supervision] and the auditor comes along and finds that it doesn't."
Schaefer noted threats of intimidation was another threat in itself. "It's important for auditors to document all threats. So having identified that a potential threat may exist, it doesn't mean you can't do the audit, but you need to think about what you're going to do about the potential threat.
"There are safeguards that you can put in place, but you need to document what it is you're doing... what it is you've got that ensures that this particular potential threat is not going to impair your opinion in any way."
