ASIC action against auditors ensuring high standards are maintained
The SMSF sector is seeing a rationalisation of auditors in the industry and a much higher benchmark of what they are doing in regard to the expectation of the regulators, says an expert in the industry.
In the latest SMSF Adviser podcast, Aaron Dunn, founder of Smarter SMSF, said the latest de-registration of auditors by ASIC has highlighted how serious the ATO is about ensuring the industry maintains its high standards.
“We need to remember that the ATO is the one that refers to ASIC so it will spend a lot of time looking at the level of skill undertaken by an auditor through the audit process,” he said.
“They have their auditor program, and they will look at and test the quality of audits that are getting done on various sizes of organisations and where there are deficiencies, and where they see it as being appropriate, they will refer to ASIC because [the auditors] are, of course, registered with ASIC to be an approved SMSF auditor.
“[Any decision they make] will be based upon the facts of the case put before them as to whether they will determine whether to disqualify or put some type of caveat on their audit registration, of which they would need to show improvement.
“Otherwise, in essence, they will be disqualified in their own right as well. So, a system that needs to be well functioning needs to have a very robust audit industry.
“And really, we’re seeing a much-heightened expectation in particular since July of 2021, where we saw a fairly dramatic shift in who’s doing audits and the number and the independence rules that came in around that.”
Mr Dunn said ASIC has so far acted against 26 SMSF auditors for failing to meet the independence and auditing standards, or whose conduct called into question the integrity of SMSF audits.
“The Commissioner mentioned that the vast amount of money that’s held in a little over 600,000 SMSFs is around $865 billion in assets, so it’s not surprising that ASIC is trying to make sure that everything’s being done is the way it’s meant to be done,” he said.
“And the reality is that we have a system in Australia that is one of the most unique retirement systems in the world, where you get to hold on to the chequebook of your own retirement savings, therefore the audit function important because it makes sure that the trustee, who is in essence holding those purse strings for their own retirement, is actually doing the right thing, both on a financial perspective, but also in a compliance context.
“The audit framework within the SMSF industry provides a really important role because they act as the gatekeeper to the regulator, to make sure that we end up with a well-functioning system.
“And by and large, it works. The ATO is really only having to focus on the one or two per cent that do it wrong.”
