SMSF auditor loses appeal after major breaches

On 5 July 2017, ASIC made the decision to disqualify Kathleen Whittle of NSW from being an SMSF auditor after an ASIC investigation found she had audited the fund of her brother and the fund of her de facto partner.

ASIC said it considered this to be in breach of the Compiled APES 110 Code of Ethics for Professional Accountants (APES 110).

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Ms Whittle then made a request for internal reconsideration for the 5 July 2017 disqualification. ASIC then confirmed the decision on 29 August 2017.

Following this decision, she then took the matter to the Administrative Appeals Tribunal for review.

Discussing the appeal in a webinar, DBA Lawyers senior associate David Oon said on 18 June 2018 the AAT affirmed the decision made by ASIC to disqualify Ms Whittle.

In its closing remarks, the AAT pointed out that Ms Whittle was subject to the APES 110 independence obligations and was aware of them for each year she audited her brother’s and her partner’s SMSFs, said Mr Oon.

Mr Oon said while the AAT accepted that Ms Whittle acknowledged and regretted the breaches and would probably never breach the independence requirements again, she had not “demonstrated insight into her conduct”.

“The breaches were ongoing and the requirements were clear,” said Mr Oon.

The AAT took into account the deprivation of one source of work for Ms Whittle, he said, but noted she could still carry out accounting work.

Auditors have been a primary focus of the regulators in recent years, with independence in particular being on the ATO and ASIC’s radar. 

For example, in the first half of the year, the ATO said it will be visiting 300 SMSF audit firms in 2018, in a bid to seek assurance on key compliance requisites, including independence.

“SMSF auditors play a fundamental role in promoting confidence in the SMSF sector so it is crucial that they adhere to ethical standards and other requirements. ASIC will continue to take action where the conduct of SMSF auditors is inadequate,” said ASIC commissioner John Price earlier this year.