For firms looking to outsource their audit clients to an independent audit firm in response to the new guidance, what kind of considerations do they need to be making in terms of software and systems?
For firms that are currently doing audits in-house, the current workflow would be pretty easy: you do your work and email it over to your colleague or walk it over to them. Once they start working with a completely independent audit firm, there’s going to be a whole external workflow that will need to be managed. For example, they’re going to need to figure out how the external auditor wants the data documented and how the two firms are going to communicate queries and communication and how that’s going to be set up. That’s a whole change management piece. The new auditor might have a completely different process and trying to bed that down is going to carry a lot of time and cost risk and involve a lot of back and forth.
That’s where technology plays a role in terms of integrations, automating processes, standardising the job and improving the management of queries and reviews. Everything is in the one place, which means you won’t be spending as much time collating different things.
The other important aspect of the guidance is that there’s going to be restrictions around how many funds are with a certain auditor, so instead of sending 200 funds to the one auditor, the likelihood is that they’re going to have to manage multiple auditors for those funds. So, that change process and all of those risks mentioned will be potentially doubled or tripled. So, there could be three different types of auditors, three different relationships and that could be three different change management pieces. If everyone is using the same software, that’s one less process that you need to worry about because you know it’s automated and standardised. Technology can play a huge role in managing that.
For independent audit firms expecting to see a significant increase in client numbers, what do they need to think about in terms of increasing the efficiency of their firm and improving processes?
For independent firms, having the right systems in place offers scalability. If the estimates are true, 30 per cent or even 200,000 funds may be impacted by this change and will need to find a new auditor. There’s a huge opportunity for specialist audit firms to set up these types of processes and offer clients a smooth workflow. A big sell point for these firms is going to be making life easier during the transition, and that’s going to be a big bonus for them if they’ve got that automation and integrations set up already.
Do you have any general tips for SMSF firms in relation to managing the new independence standards?
I think the biggest tip is to start looking at it early on. As mentioned, if there’s going to be a big portion of the market making the shift and even though it may seem like it’s 12 months away, there’s a risk in waiting too long and not getting it done.
I think it’s also important to understand what possibilities are available in the market, whether that’s outsourcing or technology, before deciding on a structure change for your firm. For example, technology ecosystems can help connect you with other firms, build new relationships and potentially find new or replacement business for your firm.
