ASIC swoops on SMSF auditors in reciprocal audit crackdown
ASIC has accepted voluntary cancellations or imposed conditions on the registration of 18 SMSF auditors who were involved in reciprocal audit arrangements.
In a public update, ASIC stated that it had identified 18 SMSF auditors who were involved in reciprocal audit arrangements, which create self-interest and familiarity and threaten independence.
The 18 auditors were referred to ASIC by the ATO for contravening the independence requirements under the APES 110 Code of Ethics for Professional Accountants (APES 110) because of their involvement in reciprocal audit arrangements.
ASIC stated that each of the reciprocal audit arrangements involved two SMSF auditors who audited each other’s personal SMSFs.
“There are no safeguards that can reduce the threats to an acceptable level and the auditors should not have entered into the arrangements,” it said.
Consequently, ASIC accepted voluntary cancellation requests from nine of the SMSF auditors and imposed additional conditions on the registration of the other nine.
The additional conditions imposed on the auditors include:
- Restrictions in relation to audits of their personal funds;
- Independence reviews to be performed and declarations to be made to ASIC about their SMSF audit clients;
- Additional education requirements relating to ethics and auditor independence;
- A requirement to notify their professional association.
The corporate regulator said the actions were appropriate considering the auditors’ individual circumstances and the developments in guidance and practice since ending their reciprocal audit arrangements.
“It should now be clear to SMSF auditors that entering into reciprocal audit arrangements is an unacceptable breach of their independence requirements. ASIC will disqualify auditors for such breaches where appropriate,” ASIC warned.
ASIC reminded SMSF auditors that they must comply with the auditor independence requirements set by the Accounting and Professional Ethics Standards Board (APESB) in APES 110.
“Auditors are required to identify, evaluate and address threats to their independence,” it said.
“Guidance on reciprocal SMSF audit arrangements is included in APESB – Independence Guide – Fifth Edition, May 2020, which explains the relevant independence threats and the lack of available safeguards.”
It also noted that SMSF auditors have the right to appeal decisions ASIC makes in relation to them under the SIS Act.
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.
