A look back at how our approach has evolved reveals a dramatic change in the expectations of accountants as our main client base, from shrinking time frames to increased awareness of complex investments. What’s next for the business of SMSF audits? By Heath Griffiths, director, Quay SMSF Audits
When I first began to specialise in the SMSF audit world, I took on the role of SMSF auditor at the ATO. Working for the regulator of SMSF, the service standard for completing an audit was 90 days, I still shudder to think, and there was no opportunity to supply any information electronically. Everything had to be sent in by paper. We had one week to respond to emails or phone calls. This was accepted as the norm for a government body and there were few complaints or issues.
Leaving the tax office and landing my first role as senior auditor, the service standard had shrunk to 14 days. Everything was supplied electronically and emails were answered within 24 hours. At the time, this was hard to meet for our entire team and it seemed that, with queries being sent, the client was feeling that the process was taking too long.
After starting our own firm, I realised that the 14 days was considered fast from many of our new clients as they were used to waiting a month or more. We stuck with the standard 10 working days for all my clients’ agreements, baring queries of course.
Through increases in knowledge and automation, our current turnaround time has been reduced to around two to three days or 24 hours at times for all clients, and is now the standard our clients accept. Additionally, we respond to most emails, mostly rich with technical detail, within hours if not immediately.
We perform a number of additional tasks for our clients, from helping to draft an enforceable undertaking to supply to the ATO to discussing breaches directly with their clients.
An additional driver for clients has been price. The cost per audit has plummeted from well over $1,000 to fixed price audits under $500. Due to factors such as the ASIC SMSF auditor registration regime where are now many more independent small audit firms which can offer competitive prices due to lower overheads, outsourcing and/or having staff work remotely.
Looking forward, the realm of SMSF audit has become ever more specialised, to the point where we converse in section and regulation numbers, and we see more complex investments every day.
The expectation over the mid to longer term is that our clients and our firm work hand in hand to openly discuss their client, investments, issues and steps to rectify any breaches identified.
For many of my clients, we are shifting to having a brief discussion, via phone or email, regarding their clients’ fund before the audit procedure commences. The general structure of this dialogue usually follows the pattern of:
1. Our client reviewing our previous management letter or auditor contravention report, where previous issue has been identified, and a brief description of steps taken to rectify it;
2. Where any potential issues from the current year have been identified, a description of event and request for review in regards to the legislation and ATO view;
3. Our firm dispels any issues that are immaterial or inconsequential and prepares a detailed response, for use as file note, as to where each material issue may lead; and
4. Where needed we also call and discuss any other future issue that arises from specific requirements of the legislation or ATO.
By using this process, we ensure that we have all the required information before we commence our audit, thereby cutting down on queries and allowing the audit process to be completed in a timely manner. This enhances our relationships and strengthens it going forward, which is of upmost importance to us and our current and potential client base.
As this process takes shape, our clients choose to engage with us as early as possible which allows us to be a part of the annual SMSF process from the very beginning.
Looking at a possible saturation of SMSF auditors, in the longer view, clients want an auditor to offer something unique to each client and the needs they require. Clients driven by price will ultimately want the cheapest audit in the future, clients with a large SMSF portion of their business will be looking for a technical partner to complement their own skills and clients who have less SMSF technical knowledge will want an auditor who has clear knowledge of SMSF legislation to help them identify possible compliance risks.
With our changing landscape, we have seen ever shorting audit times and price reduction. As these are reaching their limits, the real driver will be audit expertise and auditor engagement with their clients. In other words, the ability of the auditor to add value to their clients’ needs.
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