A long-held perception is that auditors spend their days ticking boxes and are nothing more than agents for the ATO. I have a different perspective on the role of an SMSF auditor whom I see as a key member of any SMSF strategy team.
Advances in technology are encouraging a new breed of SMSF auditor, one that is able to form part of the SMSF strategy team by taking a real-time approach to their engagement. This next generation of auditors will be much better utilised for their specialist expertise.
The auditor’s report is mandatory, and a vital part of the SMSF regulatory system. However, auditors also play an important role in educating trustees and advisers, and hold a unique independent position that can add significant value when it comes to the daily running of an SMSF.
Auditors skilled in SMSF strategy
I view the appointment of an auditor who is less skilled in SMSF strategy than the SMSF adviser as a waste of time and money. To be effective, an adviser must choose an SMSF auditor who they trust to have at least equal or preferably superior knowledge of current SIS law and SMSF strategy.
When it comes to complex SMSF strategies, it is common for significant delays to occur at audit time if the auditor:
• doesn’t understand the strategy;
• has never seen the strategy before and needs to be educated;
• is over-conservative to the point of being unwilling or unable to objectively assess new strategies; or
• hasn’t been involved at the crucial time to ensure the SMSF strategy advice and implementation is complying, well documented and faultless in its execution.
Specialist SMSF auditors must actively seek ongoing education in SMSF strategy. Without this training, auditors are more likely to come to the wrong audit conclusions. Worse still, they will have a limited toolbox of strategies and options to offer clients when making recommendations on alternative strategies and rectifying breaches when they occur.
The SMSF auditor ideally should be an external expert. However, does the requirement for auditor independence exclude the SMSF auditor from being an SMSF strategist? Absolutely not.
A shift in perspective is required. The fact that I have reporting obligations to the ATO should I detect a breach does not make me an agent for the ATO. I work for my clients to provide my expert opinion to the Trustees on the financial statements and compliance with SIS law. The most appropriate time for this expert opinion to be utilised is when strategies are being developed and implemented.
When it comes to independence, establishing clear boundaries and rules for the auditor’s role in the SMSF strategy team is extremely important. The strategic auditor must be very clear in the definition of their role, and ensure that expectations of the clients and the strategy team are appropriate.
Utilising the auditor’s specific skill set
The talent of an SMSF specialist auditor is wasted if it is being used on tasks that digital technology is taking over. The paperless audit office is now freeing up audit hours for more meaningful endeavours.
The best SMSF strategists in the industry know the importance of a strategic auditor. That is, a specialist SMSF auditor who has the ability and technical knowledge to:
• identify holes and problems in strategies before they become irreversible;
• provide expert advice on complying documentation and step by step implementation that complies with SIS law and aids an efficient audit;
• optimise SMSF strategy;
• provide a range of alternative solutions to complex problems and situations; and
• provide an accurate and consistent annual audit report for every client.
As part of the SMSF strategy team, we don’t want to bring the same skill set as an advisor. It’s the specific skill set of an auditor that adds value to the outcome for the client.
If you’re looking for ways to improve professionally, make sure you have invited the right auditor to your strategy table. That auditor could one day save you from a disaster, but without doubt will add value to your strategy team.
Jo Heighway is the founder and chief executive officer of Engage Super Audits.