Reciprocal auditing crackdowns the tip of the iceberg from ASIC
Is ASIC’s enforcement of independence standards regarding reciprocal SMSF Auditing arrangements a glimpse into future crack downs?
The APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (2018) outlined additional independence recommendations beyond the reciprocal auditing arrangements that saw 18 auditing firms disciplined last week. This action by ASIC is a jarring sign that auditors should now be on high alert.
With fee referral threshold recommendations also included in APES 110, it’s a natural assumption that the next big focus area for ASIC will be aimed at breaches of these regulations.
The ATO has provided us with the guideline of a 20% maximum threshold of fees from a single referral source for audits, but it remains to be seen how this will be applied in reality as we enter the new financial year.
My view is that breaches of this threshold will likely be next in the line of fire, and it will impact many more auditors than the reciprocity standards.
With a number of firms expressing angst over this arbitrary threshold, I ask myself why? I’ve amassed significant knowledge over the years in the audit industry, however the one understanding that I have built my business and reputation on is the premise that the primary aim of auditing is, believe it or not, to be objective.
At Reliance Auditing, we are entrusted to protect the trustee’s retirement savings by identifying compliance risks in relation to transactions within the SMSF.
How can auditors remain objective if their own compliance is threatened by self-interest?
If the very intention of the auditing profession is to conduct an impartial assessment of a fund’s compliance with superannuation law, then why make any concessions that might compromise that?
While the clock is ticking for firms to correct their conduct from an independence standpoint, I believe many players will find this requirement very challenging to comply. Rightfully, this shake up in the industry will lead to better outcomes for all, raising the standard of work and ultimately preserving the audit quality.
Tony Zhang is a journalist at Accountants Daily, which is the leading source of news, strategy and educational content for professionals working in the accounting sector.
Since joining the Momentum Media team in 2020, Tony has written for a range of its publications including Lawyers Weekly, Adviser Innovation, ifa and SMSF Adviser. He has been full-time on Accountants Daily since September 2021.