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ASIC enforcement action on SMSF auditors

ASIC enforcement action on SMSF auditorsASIC has released information on its enforcement action against over 100 SMSF auditors (some referred to it by the ATO for various breaches including not meeting independence requirements, not complying with auditing standards, not reporting non-compliance, and not meeting the fit and proper person requirement).

ASIC said it will continue to take action where the conduct of SMSF auditors is inadequate. If you are a trustee of an SMSF, you have certain obligations including ensuring that your SMSF auditor is registered, to find out more, search the ASIC register.

ASIC, as co-regulators of SMSF auditors with the ATO, has provided details of its enforcement actions against over 100 SMSF auditors to protect consumers and the integrity of the superannuation system. Whilst the ATO is the one that monitors SMSF auditor compliance, ASIC is regulatory body that investigates any compliance matters that the ATO refers to it.

Overall, ASIC has the responsibility for registered “approved SMSF auditors”, setting competency standards and imposing any necessary administrative outcomes. To register as an approved SMSF auditor, eligibility requirements must be met (ie prescribed qualifications, experience, passed a competency exam, fit and proper person, adequate professional indemnity, and be an Australian resident). After the registration is approved, SMSF auditors must also complete ongoing obligations such as undertaking professional development, complying with required standards, lodging an annual statement and notifying ASIC of certain matters.

ASIC Commissioner John Price said, “self-managed superannuation fund (SMSF) auditors perform an important role in giving independent assurance over fund financial reports and reporting non-compliances with fund requirements. As gatekeepers, they are expected to adhere to the highest standards in the performance of their role. ASIC will continue to take action where the conduct of SMSF auditors is inadequate”.

To 30 June 2018, ASIC has considered the conduct of over 120 SMSF auditors, including 98 matters referred from the ATO. As a result of investigations, ASIC has removed 76 auditors from the register, suspended on auditor, and imposed conditions on the registration of 24 auditors. The action taken against SMSF auditors mostly related to the following breaches:

  • not meeting auditor independence requirements – auditing their own fund, a family member’s fund, a business partner’s fund, or funds for which the auditor has been responsible for preparing accounts or financial statements;
  • not complying with auditing standards – not planning or properly performing audits, not obtaining sufficient appropriate audit evidence, and not adequately documenting audit work. This includes deficiencies in auditing asset values and the treatment of limited recourse borrowing arrangements in fund financial reports;
  • not identifying or reporting non-compliances – non-compliance with fund trustee composition and ownership of assets requirements as well as the sole purpose test;
  • not meeting a fit and proper person requirement – providing false and misleading statements, insolvency or bankruptcy, fraud, not managing their own tax compliance, not cooperating with enquiries by ATO or ASIC, and breaches of their duties as a registered company auditor.

In relation to the conditions imposed on the registration of SMSF auditors, ASIC noted that they include restrictions on the funds that can be audited (including under specific independence circumstances), limiting the number of SMSF audits that can be conducted, peer review of audits (with the results being reported back to ASIC), additional training requirements, passing the auditor competency exam, adherence to strict timeframes for responding to ATO or ASIC, and providing notice of registration conditions to professional associations.

Make sure your fund is protected

If you are a member and trustee of an SMSF, you have certain obligations including ensuring that your SMSF auditor is registered. To find out more, simply search ASIC’s free SMSF auditor register. Alternatively, if you would like to talk about any issues with your SMSF, we are here to help.