ATO refers additional SMSF auditor to ASIC

The latest ATO update shows that an additional auditor has been referred to ASIC since then, with the total number of auditors referred to ASIC by the ATO now sitting at 31 for the 2017/18 financial year.  

Based on the latest figures, the ATO said out of the 31 SMSF auditors referred to ASIC, 25 auditors had issues relating to insufficient evidence.  

Out of the 25 auditors who were found to have insufficient evidence, 23 of those auditors also had independence issues.

Over half of the 31 auditors failed to ensure the fund’s assets were at market value.

The ATO said the jump in referrals from 22 auditors last year to 31 this financial year so far could reflect its increased focus on auditor assurance.

It has contacted auditors it suspected were preparing accounts and financial statements for funds they also audited.

“We are completing full audits of auditors where the contact confirmed this was the case,” the ATO said.

In these cases the ATO explained that the auditor is generally a sole practitioner — a sole-registered auditor in a business — but often with some staff.

“The staff typically prepare the accounts or financial statements and either the auditor, or a senior staff member, signs off on these. Our view is that this still creates an independence issue because the staff report directly to a sole-practitioner auditor,” the ATO said.

It also found evidence to support industry concerns “that low fees might equal low quality”.

“For example, with some low cost audits we’ve found gaps in audit evidence, contraventions identified but not reported, instances where there was no written audit plan, limited or no use of checklists and a lack of key documentation such as trustee representation letters,” it said.

“An ATO investigator, or another auditor, should be able to pick up an audit file and see how the work was done, including documentation that supports significant judgements.”

The ATO also noted that where its data indicates an auditor may be auditing a relative or relatives’ funds, this “raises significant concerns about whether the auditor is meeting independence requirements and we will initiate an audit”.

“We have referred cases to ASIC.”

“During our compliance work we also look at compliance with CPD requirements. We have found some compliance gaps and have passed this information onto ASIC,” the ATO said.