The director of one SMSF auditing firm has suggested SMSF trustees could be “risking a lot to save a little” by using a low-cost auditor.
A low-cost and 'one size fits all' SMSF audit fee business model uses low profit margins to attract volume, according to director of SuperAuditors Shelley Banton.
The ATO is targeting low-cost SMSF auditors, she said, suspecting the high turnover of work means they do not examine contraventions closely enough.
“With trustees now personally bearing the cost of ATO penalties, a low-cost SMSF audit today may not be a low-cost ATO SMSF audit tomorrow,” Ms Banton said.
“SMSF auditors… price according to time. Unfortunately, there’s no such thing as a standard fund. So how can it cost the same to audit a fund with a limited recourse loan borrowing as it does for a fund with a single bank account? It can’t. No matter what technology they’re using, or how much work they’re doing, it’s a loss leader,” she said.
Also, accountants usually establish a relationship with an SMSF auditor, Ms Banton noted. If a fund is audited by the ATO and the outcomes are adverse for the accountant’s client, the accountant could face a professional indemnity claim.
In addition, the trustee would have recourse to the accountant since they relied on the accountant’s advice to engage the auditor in the first place, Ms Banton said.
Ms Banton noted that the ATO is actively trawling social media sites for information on low-cost auditors providing “easy audit outcomes” and data matching SMSF auditors with the number of ACRs they lodge and their audit fees.
“If these factors trigger an ATO review of the SMSF auditor’s files, that low-cost SMSF audit could end up costing both the trustee and accountant a lot more,” she said.
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