As the ATO has reiterated widely – and particularly since auditor registration was introduced – independence remains an important and continuing focus of the regulator’s SMSF compliance program.
Director of superannuation at the ATO, Howard Dickinson, said yesterday in a webinar that the ATO is well aware of independence concerns involving large-scale entities and so-called “Chinese walls”.
“If we look at a large firm, and find concerns about the independence of their practice and we identify issues in the funds that have not been identified in an audit… we will take serious action against them,” he said.
“We are looking at two complaints with regard to large-scale firms who have in-house auditing services right now, and those two complaints involve pressure being put on auditors to not report issues.
“We will be taking very serious action where we find this is the case, and are working with the rest of the ATO and TPB and indeed ASIC in those cases.”
The ATO continues to receive “very silly” questions for practitioners on the issue of auditor independence, Mr Dickinson added.
“I was told very recently from someone who is about to be referred to ASIC that they are independent because their company audits their own fund and all they do is sign it off,” he said.
“There are all sorts of examples. And, I have to be frank, ASIC and the ATO are very serious about independence and very serious about people who are pushing the boundaries of independence, particularly – which is often – when we find that there are some issues with the fund as well.”
The ATO is also finding auditors who persist with auditing their own fund, or the funds of relatives.
During the webinar, the ATO stressed that where potential breaches surface, the importance of timely and professional communication is paramount.
“Your interaction with us as regulator of your industry reflects on your fitness to be an auditor. Where auditors fail to respond to our request, continually delay their responses or are otherwise uncooperative during a compliance activity, we will refer this info to ASIC to consider,” the ATO stated.
“Unfortunately, we do have some instances of people not responding to our requests for information or being uncooperative.”
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Mr Dickson should also be concerned as how the legislation stands today on SMSF Auditor independence – the SIS Act, RG 243 and the CO 12/1687 and GS 009 all point towards APES 110 for guidance on independence.
APES 110 is drafted by CA, CPA & IPA and has to lean towards benefiting their members who also happen to be ASIC approved SMSF Auditors.
How a three partner firm of which one partner is an approved SMSF Auditor can be independent when he is only auditing the firms accounting SMSF clients, simply beats me.
If they have 100 – 300 funds they will need two separate staff members who will sit on either side of the Chinese wall – one preparing accounts and one auditing And the firm has to make a profit!
A tall ask… from all angels…
but has ASIC’s tick… and it works or does it… skeletons in the closet … i think.