Shelley Banton, head of education for ASF Audits, said despite media reports the audit sector will be under the spotlight as the class action gets underway, she is not concerned about potential negative impacts.
Last week, law firm Mackay Chapman filed a suit in the Federal Court in Sydney on behalf of 24 victims of Ms Caddick.
The filing alleged that the auditors engaged to review the annual financial reports for the SMSFs failed to identify fraudulent documents prepared by Ms Caddick and failed to confirm that the assets said to be held by the SMSFs existed.
It further alleges that auditors were negligent, engaged in misleading or deceptive conduct and/or representations, and breached the Corporations Act and ASIC Act.
According to the law firm at least five auditors were engaged to conduct the mandatory annual audit of the SMSFs between 2012 and 2020.
Mackay Chapman also alleged that capital losses of around $12 million will be claimed, relating to 24 funds representing around 50 investors.
The firm said in a media release that “the financial reports reviewed by the auditors were supported by fraudulent documentation prepared by Ms Caddick and the assets said to be held by the SMSFs did not exist”.
Ms Banton told SMSF Adviser it is outrageous to think an entire cohort of SMSF auditors have had their professional reputations tarnished by the five named in this class action.
“SMSF auditors who purposefully avoid their professional responsibilities for many reasons, such as a lack of auditor independence, poor documentation, failure to report non-compliance and a conflict of interest, should be held responsible for their negligence,” she said.
“The outcome of this class action will rely on the facts and circumstances of each SMSF auditor’s audit file and whether it contains sufficient appropriate audit evidence to substantiate their opinion.”
Ms Banton said there would be no class action if Ms Caddick’s clients still had their money, and these types of lawsuits are the exception, not the rule.
“SMSF auditors are proudly committed to safeguarding Australians’ retirement wealth and the integrity of the superannuation system,” she said.
If the case is successful, media reports suggest that more than a million SMSF investors could be affected by the doubt cast by a questionable audit system.
Ms Banton said recent ATO scrutiny and action against auditors is not an indication the SMSF audit sector is deteriorating.
She said there are about 4,000 active auditors and recent regulatory changes have seen a “reset” of the sector.
“We have more than enough auditors, and people underestimate the power of technology here,” she said.
“The problem is auditors who do a handful of funds each year cannot keep up with the standards and issues in the industry,” she added.
Some healthy speculation for audit professionals might be:
1. Listed shares were agreed to a “broker/in-house report”, not confirmed on a share registry.
2. The shares purported to be on a platform/IDPS but no GS007 audit report was obtained.
3. 2 above, and a GS007 report was obtained, but was fake?
When I first heard about this I was dismayed that as usual, people are trying to blame someone else for their problem when some due diligence may have averted a disaster. I myself have sometimes been too busy to check credentials and I have been caught out (tradespeople) and I only blame myself. It is incumbent on the government levels and the law to remove crooks from society and make sure that they never again are allowed to do their trade, but too often they just phoenix to the next business in the same industry. This is the authorities letting people down too.
How in this day and age this perpetuates is beyond me?
I guess it is incumbent on us to check the licence number of anyone offering services, but it would also help if authorities made these checks easy.
Every year when my smsf is audited it frustrates me that I have to give so many details all over again, but I guess that because of fraud and renewals etc etc, it is imperative. But for the fee that I am asked to pay, I always wonder how the auditors get a reasonable living out of the work that they do.
I have been wondering, especially of late, if they can’t have access to things like company searches etc without having to pay for each search each year? Can this not be part of their licence fee, and being electronic, the govt shouldn’t be increasing their fees either to make more money out of the auditors and therefore the clients? Or is that too sensible and too easy?
Maybe this is already the case, but each year I am asked to send ASIC renewal forms etc etc. So much loss of productivity….
And the red tape just gets worse and worse…. I am just so over it all and can’t wait to retire in an effort to simplify my life and gain back precious personal time.
Let us hope sanity prevails. In a country where productivity is in the spotlight the need is for individuals to take responsibility for their actions. It is time to draw a line in the sand before the ‘ivory tower brigade’ foist additional levels of administration and costs upon us.
“The problem is auditors who do a handful of funds each year cannot keep up with the standards and issues in the industry,” she added. Sick of hearing this. One of the audit firms named in the action is top 100.