ATO sounds alarm on emerging auditor risk
The ATO has raised concerns about certain reciprocal arrangements in place between SMSF accountants following responses from a recent survey it conducted.
In an online update, the ATO said that one of the major risks relating to the performance of approved SMSF auditors continues to be auditor independence.
Blatant independence breaches such as auditors who audit their own SMSF or those of close family members have long attracted the ATO’s attention.
The ATO has also previously had its sights on SMSF auditors who enter reciprocal auditing arrangements where two auditors with their own SMSFs agree to audit each other’s funds.
Based on the responses to a recent survey, the ATO said that some auditors believe that independence risks arising from reciprocal auditing arrangements can be safeguarded against.
“It is the view of the ATO and ASIC that there are no safeguards that can reduce the threats to independence arising from this type of arrangement,” it stated.
Another type of arrangement which is also raising concerns for the ATO more recently is where two professional accountants, who are also SMSF auditors, prepare the accounts for a number of SMSFs and enter into an arrangement to audit each other’s clients’ SMSFs.
SMSF professionals should safeguard against this, the ATO said, by ending these reciprocal arrangements or spreading referrals to a number of different SMSF auditors to minimise reliance on this source for SMSF audits.
“Approved SMSF auditors who continue to engage in reciprocal auditing arrangements will be subject to increased scrutiny. Referral to ASIC may result if we consider SMSF auditors have failed to meet the independence requirements,” the ATO warned.
The ATO said that SMSF auditors should consider some of the potential threats to independence that are set out in Accounting Professional and Ethical Standard (APES) 110 Code of Ethics for Professional Accountants including self-interest, familiarity and intimidation.
“An SMSF auditor having a close relationship with, or a high regard for, the other auditor may be influenced to ignore certain issues or to undertake a cursory and inadequate SMSF audit,” the ATO stated.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
