The concept of real-time auditing has been championed by Engage Super Audits chief executive Jo Heighway, who told SMSF Adviser it’s “no longer acceptable” for auditors to be receiving client information months after transactions have occurred.
“That means effectively our advice is almost way too late to even be relevant to anybody. Real-time information is what everyone wants,” Ms Heighway said.
However, director of SuperAuditors Shelley Banton likened the wait for real-time SMSF audits to the wait for “hoverboards”.
“It’s an exciting idea in lots of ways, but we won’t be seeing real-time SMSF audits any time soon,” Ms Banton said. “Why? Because the technology hasn’t been developed yet.”
Ms Banton said it would take deep pockets and access to “a multitude” of resources to set up continuous auditing for SMSFs.
“In the end only larger SMSF administration platforms will be able to offer continuous SMSF auditing, or some sort of hybrid, mainly due to economies of scale,” Ms Banton said. “Smaller platforms won’t be able to negotiate with banks and financial institutions to obtain simple data feeds.”
In response to Ms Banton’s comments, Ms Heighway told SMSF Adviser real-time auditing shouldn’t be considered a “fantasy” idea.
“The argument that real-time auditing is not coming any time soon because the ‘technology hasn’t been invented yet’ misses the point. We don’t need to wait for technology to be built before we can start moving in this direction,” she said.
“Yes you can sit back and wait for technology to be ‘invented’ for you. Or you could look at technology well and truly available today, and consider what can be done right now to use this technology to make [an] audit more relevant and valuable.
“Auditors should not feel alarmed in any way by the idea of bringing their audit work closer into the present, they should feel excited by the potential.”
I agree with most of the comments raised, in that Ms Heighway seems to be ignoring “Auditing” standards.
An auditor should NOT be involved in the management/operations of an entity he/she is auditing. To do so has various risk/implications in that the auditor is not able to “audit” work that they have been involved with. You cannot independently audit transactions that you’ve been integrally involved with.
Real-time Audit software is used (particularly by big 4 firms) on large multi-national audits, assisting them in auditing tens of thousands of transactions throughout a year (quite different to an SMSF).
I am a director of a corporate Trustee (one man fund). I don’t pay for an administrator since I enjoy learning about and administering the fund myself, and besides, if I was paying someone to look after it I might as well put it all in a commercial fund.
The idea of real-time audit appeals to someone who is a DIY Trustee such as myself. Getting an auditor’s opinion of whether they would fail an audit can only be beneficial to a Trustee, since it should help to eliminate compliance issues before they happen, and should also help people keep their compliance up to date rather than creating a rush at the end of each year.
It might be upsetting to some in the super fund administration community since it directly affects demand for their service. It might encourage people to do DIY.
P.S. disclosure – Jo Heighway did my super fund’s first audit in 2012. I am not currently her client since my only criteria for choosing an auditor is price.
Auditors providing advice!!! Hope they are licenced
Jo is risking alienating potential clients with these views. She is an auditor who works for administrators who know what they are doing or she shouldn’t be engaging for them. I say let them do their job and focus on your own which is a cheap year end audit of the PAST year as required by the ATO.
It is very rare a fund to have over 300 transactions in a financial year.
In my experience half the funds have less than 100, including my own fund.
If a transaction is likely to breach the Act or a Regulation, then it is the trustees job to seek advice from the administrator or an adviser or even ATO.
As far as I can remember, from my university books, role of an auditor booklet produced by ATO and other publications, auditors job is to verify evidence and express an opinion and the SIS Act obligation to report in a standard report. Nowhere, I have read that the auditors role is also to monitor and advice trustees.
As far as I understand, all the auditor can do is comment his observation in a management letter to the trustees, but cannot influence or guide them. It is not his job, period.
Under these circumstances, I do not understand what Ms Highway wants to archive other than gain publicity by making some noise.
What is described here is the function of the administrator not the auditor. As an administrator, our funds are updated weekly, reviewed quarterly with an additional review in May/June for contribution and pension issues. Any issues are corrected well before the auditor even sees it. Real time auditing is a waste of trustees money.
Proactive auditing should include an interim audit process that identifies issues like under payment of pensions and placing tax free status at risk, or advances made to beneficiaries that should not have been. reviewing daily, or even monthly, is overkill in almost all cases. There may be the odd case where more active audits of SMSF are logical, but I have not seen one yet.
Just more spruiking by someone wanting to sell their services. They should be paying for advertising and not getting free editorial.
There is absolutely no case for real time auditing in most SMSF cases. Many of which are a single asset commercial real estate investment with the same tenant, the trustees own business, paying monthly rental for many years.
Many others are generally a diversified share portfolio on an independent platform which in itself has strict controls.
The concept that auditors provide proactive advice to trustees is indicative of a lack of adequate independence. Auditors review the structure and what may have happened out of that structure. That is more than adequately done under the existing systems. People choosing to act illegally are going to do so regardless and no amount of real time auditing is going to happen before the money is gone.
SMSF auditors are feeling the frustration of being on the receiving end of work by cheap and nasty SMSF administrators & their advisers, who don’t identify compliance issues on the fly & have them fixed before the audit. FP’s & brokers who have little or no experience with accounting, tax & compliance, don’t value it, hence think they are doing good in finding clients a cheap SMSF admin solution, when in fact they are putting clients at risk. Auditors check assets exist & specific compliance with SIS law. They don’t verify every box on the tax return, check every accounting transaction or the like. If you think they do all that for a few hundred dollars, then that’s your own “expectation gap” problem. If there is no SMSF specialist administrator between the client and the auditor, the auditor finds themselves having to clean up and send back poor admin work, and otherwise take up the slack for cheap nasty SMSF admin. No wonder they feel like they need to get closer to the action!
While the idea may occur in the not so distant future (Ie less than 5years) Miss Heighway is yet to say why it is a good idea.
Honestly, what is the value of the auditor knowing in real time that a publicly company dividend has been paid into the SMSF ‘s bank a/c? Or maybe the bank a/c has gone into O/draft by $20 due to a bank fee?