Speaking to SMSF Adviser, Nexia Brisbane chief executive Ken Robertson said if the government does proceed with the measure to change the annual audit cycle to three years for SMSFs with good audit history, he suspects that many firms, like his, will still complete interim SMSF audits on an annual basis.
“From a practical perspective, if we’ve still got the same number of transactions we’ve got to go through for an audit, then we’re going to be doing it the same way as we are now,” he said.
The only difference, Mr Robertson said, is that the actual audit report will be issued once every three years instead of every year.
“How could you possibly do three years of transactions in one year? What are you going to do with the staff that are going to have to do that every third year – pay them to sit around and twiddle their thumbs for the other two years? I suspect not,” he said.
The practicality, Mr Robertson said, is that auditors would still to do an interim audit on the financials because the tax agent will still be preparing a set of financials and a tax return every year.
“We’ve thought this one through and we can’t see that there’s going to be that much change in our activity,” he said.
The proposed measure is therefore merely “a snow job by the government”, Mr Robertson said, where they’re claiming that they’re helping with compliance but it reality “doing absolutely zero and sticking out misinformation”.
The most difficult part about the measure, he said, will be explaining to clients, who believe they only need to pay for one audit every three years, that interim audits will still need to be undertaken.
“The government has done an old marketing trick here. They’re painting themselves as the heroes, and they’re going to paint people like us who [tell clients] that there’s no change as the villains,” Mr Robertson said.
It is a proposal made by someone who doesn’t know about the mandatory requirements of ASA510.
I think that the audit process is appropriate in some form
However the complaint that I have is the trivial nature of the audits
You have to prove the existence of assets and liabilities at agreed values
like traditional audit
However you spend the majority of the time seeing if the Trustee complies
with about 100 rules that the Gov thought up, writing a breach report and waiting to hear from the ATO
as the ATO has huge powers if it wants to exercise them
This part of the audit is the problem and it has to be streamlined – because nobody
can make money while this stupid part of the audit exists
Perhaps the auditor can list the minor breaches to the Fund and ensure they are fixed within 12 months
or a breach report goes in.
Only have major things go into a ATO breach report such as large missing assets etc
This 3 year audit cycle is not a good idea and demeans the audit function
If the audits did not exist the cost to the economy would probably be greater further
Please just simplify them as the current system is a farce
If you currently charged a very cheap price you either
1) Did not do the work
2) Sent the audit offshore
3)You used the audit as a loss leader to get work in another part of your business
Some clients don’t understand back office functions and don’t want to pay for then
I don’t know why the GOV want to appease this type of client
I prepare a Pty Ltd tax return and accounts, no audit required despite the fact that such returns can be very complex and if done incorrectly are clearly a significant source of risk to the revenue.
I do an SMSF tax return and accounts, often really simple, annual audit required.
Why?
Possible answers:
Since when is law all about best practice and logic?
Pty Ltd, tusts etc like SMSF’s should also be audited every year?
The fact that Trusts and Pty Ltd’s are not audited suports the case that niether should SMSF’s
Any others?
As is being heavily discussed, the proposal is flawed. If I am to undertake an audit of accounts, where the prior year cannot be verified, I will either be required to delve back into history until I find records that can be verified, which will probably end up taking longer than 3 annual audits, or I will be required to qualify the audit. Won’t my accountant clients and their trustee clients love that?
At the moment the 2018-2018 Budget papers no 2 at page 41 contains a short statement of the intention to establish a three-year cycle. Not a whole lot of detail there! So, I guess the devil in the detail will be found in the ASA’s and ASAE’s. One also assumes that the pronouncement on page 41 will be passed on to the Parliamentary Counsel’s Office where the policy proposal will be drafted into a bill. That Bill will no doubt have an EM and from there the design and compliance implementation of the new policy will be much clearer. You seem to be assuming that this bill and EM will state that ‘every three years’ an SMSF auditor must audit each year, as a standalone and then prepare a three-year report. So, your way of thinking is that the SMSF auditor will need three bank confirmation requests for each and every year and so on. Can I ask why you are so certain of this?
Anonymous commentators, you don’t have any knowledge at all of the audit work and its essential part in the smsf sector
This type of comment adds nothing to the debate. Can you please explain why the comments made prove those that made them ‘have no knowledge?’ On the basis of your self proclaimed expertise and in-depth understanding of SMSF auditing it should be easy for you to do.
Sorry, but I agree with the government. Most SMSFs have their accounts prepared by reasonably skilled accountants who know the superannuation laws, and if they are anything like my firm, we ensure that the funds are compliant before we send them to auditors. Out of 50 or so funds I do the accounting for, I have not had a qualified audit report returned yet because I ensure they are correct before I send them to the auditor. The audit is really a check up on the accounting firms doing the work, and every 3 years is probably appropriate.
Totally agree. In fact why bother with an audit at all. Cut through all the red tape and increase the ATO supervisory levy by $100 instead for all the issues that would have to be dealt with by the regulator. $60m increase in govt revenue looks good and all the specialist SMSF auditors go and work for the ATO.
A bit blunt but at the end of the day an arguable and valid point. Problem is your proposal will cut too much red tape. Remember [color=red]red tape means jobs, jobs, jobs![/color]
You have to question the logic here. You reduce a mandatory audit requirement from once a year to once every three years and somehow the time taken to plan an audit, issue a report, gather work papers, interact with the trustee etc just once will be the same, for SMSF auditor, SMSF accountant and trustee(s), as doing it three times over. Finally, has it occurred to anyone that of the 6,000 plus registered SMSF auditors out there only a few are full on SMSF audit firms, whose only source of income is SMSF auditing fees. Most registered SMSF auditors are accountancy practices who do a few SMSF audits as part of a traditional practice fee diversification model. These firms will have minimal issues with staff sitting around and that assumes the 3 year cycle will not mathematically tend to spread out as ACR’s, new funds and the like shift audit trigger dates from year 1 to year 2 or 3. Moreover, is it not possible that some some type of lodgement programme concession for those SMSF audit firms whose only source of income is SMSF auditing will appear. The three year cycle is a good thing – it reduces red tape. When you reduce red tape there is always someone with less work to do.
Totally agree
It is also a move by government to hurt families in the eastern surburbs of Brisbane Sydney and Melbourne
I love my part time business doing 3000 audits a year and spending regular periods overseas
Of the horror of governmemt policy