Are you the trustee of an SMSF? Then you should know all about the obligation to appoint a registered auditor to audit your SMSF every year. If you’ve been with the same auditor for some years, it may be wise to make some additional checks in relation to registration and auditor independence to ensure that you and your fund are covered.
If you have an SMSF or are a trustee of an SMSF then you should be well versed on the requirement to appoint an SMSF auditor no later than 45 days before the annual return is due to be lodged, but have you had the same auditor for years? Whilst familiarity with you and your fund may be a good thing, there are also some additional issues which should be considered.
Registration with ASIC
This is perhaps the most basic of requirements and when you retained your auditor you probably checked with ASIC to ensure that they were registered and had an SMSF audit number. If you’ve had the same auditor for your fund for a number of years, when is the last time you checked whether their registration is still current? Continued registration with ASIC is dependent upon many things including the auditor completing relevant continuing professional development (CPD).
Every year the ATO refers a number of SMSF auditors to ASIC for things such as CPD gaps, independence issues, and issues with the audits they have conducted. In serious cases, these SMSF auditors can be disqualified or suspended by ASIC. Therefore, it may be wise to check every year to ensure that your auditor’s registration is still current.
An SMSF auditor should not be auditing funds where they have a role or responsibility for preparing the account and financial statements. This is particularly pertinent where the auditor is a sole practitioner with other staff, and the staff typically prepare the accounts or financial statements, with the auditor or another senior staff member signing off on the accounts. In such cases, there would be an independence issue as the staff who compile the accounts report directly to the sole practitioner who is also the auditor.
Another threat to auditor independence is the relationship you have with the auditor. If you have a relative who is a qualified SMSF auditor and you ask him or her to audit your fund, this could raise significant concerns with the ATO about whether the independence requirements are met. Where this is the case, the ATO may conduct an audit of the auditor and their work. Serious cases may be referred to the corporate regulator, ASIC. Therefore, as a trustee, you should retain the services of an auditor who is completely independent to ensure you are meeting your trustee obligations.
You may think that all SMSF auditors are the same and if you can save a few dollars on the audit and put that towards your retirement then why not? Well, the ATO has found evidence that some low-cost auditors had gaps in audit evidence, didn’t report identified contraventions, didn’t have a written audit plan, had limited or no use of checklists, and lacked key documentation such as trustee representation letters.
According to the ATO, it is in trustees’ best interests to have auditors who conduct the audit in a detailed and complete manner, so that if anything happens, another auditor should be able to just pick up the file and see how the work was done, including documentation that supports significant judgements.
If you think there may be issues with your SMSF auditor including registration or auditor independence, we can help you decide whether these could potentially contravene rules. If you’ve been with a low-cost auditor and you’re not sure if they have followed all procedures and provided all the documentation for your recent audit, we can help you check.