ASIC reveals figures on SMSF auditor enforcement action

Out of the 101, ASIC has removed 76 SMSF auditors from the auditor register, suspended one auditor for a period, and imposed conditions on the registrations of a further 24 auditors.

ASIC said it has considered the conduct of over 120 SMSF auditors in total, including 98, which were referred by the ATO.

The types of conditions imposed by ASIC include restrictions on the funds the auditor can conduct audits for, limiting the number of SMSF audits that can be conducted and having audits peer reviewed, with the results being reported to ASIC.

It can also impose conditions such as additional training requirements, passing the SMSF auditor competency exam, strict timeframes for responding to the ATO or ASIC and providing notice of registration conditions to professional associations.

One of the common reasons for ASIC taking enforcement action was the failure to meet auditor independence requirements including auditing their own fund, a family member’s fund, a business partner’s fund, or funds for which the auditor has also been responsible for preparing accounts or financial statements.

Another key reason was the failure to comply with auditing standards through inadequate planning, performing audits poorly, obtaining insufficient audit evidence and not adequately documenting audit work.

“These cases included deficiencies in auditing asset values and the treatment of limited recourse borrowing arrangements in fund financial reports,” ASIC explained.

Failing to identify or report non-compliance, including non-compliance with fund trustee composition and ownership of assets requirements as well as the sole purpose test, was anther key area of concern for ASIC.

The other main reason for enforcement action by ASIC was failure to meet the fit and proper person requirement where auditors provide false and misleading statements, are insolvent or bankrupt, engaged in fraud, are not managing their own tax compliance, are not cooperating with enquiries by the ATO or ASIC and have breached their duties as a registered company auditor.

ASIC commissioner John Price said SMSF auditors perform an important role in giving independent assurance over fund financial reports and reporting non-compliances with fund requirements.

“As gatekeepers, they are expected to adhere to the highest standards in the performance of their role. ASIC will continue to take action where the conduct of SMSF auditors is inadequate,” said Mr Price.