ATO identifies red flag areas with cheap audits

“In a portion of these cases, there have been some concerns that have been revealed and we have reviewed some of the activities of those auditors providing those low-cost audits,” Ms Macfarlane said.

“[In some cases], we’ve found that auditors have failed to conduct an adequate audit that complies with the auditing standards.”

Ms Macfarlane said some of the low-cost audit providers had failed to complete a written audit plan, compliance check lists or trustee representation letters.

“In other cases, the auditor had breached independence requirements because they prepared financial accounts for some of their SMSF audit clients,” she said.

In other cases, auditors failed to verify fund assets and verify the terms and structures of limited recourse borrowing arrangements within particular SMSFs.

In one particular case, Ms Macfarlane said the auditor had failed to retain documentation in accordance with the auditing standards, and failed to identify and report two material contraventions to the ATO as required.

“That auditor had also not completed their required continuing professional development,” she said.

Ms Macfarlane said there are a number of cases still under way, where the ATO is undertaking further investigation.

“There are likely to be several referrals to ASIC for further action and another smaller group warrant further review and possible referral to ASIC,” she said.

“We also have another group flagged for follow-up to check some of [the] issues that we have identified that have been satisfactorily addressed.”

Ms Macfarlane stressed that there are still plenty of examples where audits were provided for a low fee, but the audit was performed to a high standard.

“They might only do a small number of audits for SMSFs with very simple affairs, and they might do that as part of a home business so their overheads are a lot less,” she said.

Ms Macfarlane said automation might also help to bring down the cost of an audit.

“Our review has only highlighted concerns in a portion of low-cost audits, so I just want to highlight that it’s not a widespread systemic issue that we’ve found,” she said.