Future of SMSF Auditing in Australia

Are you confused about what the new independence laws mean for your firm?

Firstly, you are not alone....

Gone are the days where a firm could prepare accounts and audit that SMSF fund in-house. ATO is now encouraging SMSF firms to think about re-structuring their audit engagements now, before 30th June 2021 when APES 110 will be enforced.

In order to be compliant with the new independence guide, you need to consider many aspects on how you currently run your business. 

After 9 months, it will be difficult for advisory firms to use the "routine or mechanical" exemptions listed in APES 110, in the existing working arrangements. It is prudent to be prepared sooner rather than later.

ATO has stated that reciprocal approach, where auditor A audits firm B's funds and vice versa, will no longer be considered as being compliant once the independence rule comes into full force from 1st July 2021.

ATO's stance is that this sort of arrangement can cause the auditor to rely on only one source of referral and can influence the judgment and behavior of the auditor whilst auditing the fund.

One of the options is to appoint a third party reviewer : this reviewer will be responsible to audit your auditing process to check your involvement in client management including involvement in preparation of accounts or advising clients, directly or indirectly.

Once the reviewer has provided you an assurance that you are "completely independent", perhaps then your audit could pass this stringent test as specified in APES 110. Please be warned that your professional body and the ATO would be looking for scapegoats to name and shame those breaching. Before you embark on this path, you must ensure that the reviewer is approved by your professional body. 

Chapter 8 of the APESB Independence Guide deals specifically with SMSF Audits.

Background

You must be wondering why all this is happening in the middle of COVID-19, actually the APES 110 Code was published 2 years a ago – November 2018 to come into effect in January’20.

The independence guide was however, published on 1^st May 2020, and due to Covid-19 most of us put it aside to read later, however we never got to it.

ATO's audits in previous years was to focus more on the low hanging fruits such as:

- Auditors auditing their own funds

- Auditors auditing their relatives funds

- Auditors auditing less than 20 funds

- High risk auditors

Limelight, for the ATO, kept getting broader, as of last year they started picking on the Top 100 auditors. The ATO released results of their review of 51 of the top 100 SMSF Auditors who audit 33% of the total population of SMSFs which representing around $186 billion in assets. 

Only 10 auditors were found to be fully compliant, 36 were told to educate themselves further, 3 auditors voluntarily deregistered once the audit was commenced & 2 auditors were referred to ASIC because they failed to obtain sufficient appropriate audit evidence to verify the fund’s compliance with the relevant superannuation laws.

The messiest funds are most likely picked by ATO to see what processes have been followed. Especially funds with multiple LRBA’s.

ATO has commenced looking at the next top 200 auditors. ATO looks at the quality of the audit and the auditors working papers, specially their checklist. 4 of the top 100 auditors who were found to be compliant use our software - Online SMSF Audit. 

In-house Audits - Some examples 

It is estimated approximately 350,000 SMSF funds are audited in house. This means that a partner of the firm which prepared the financial statements is the auditor of fund. ATO has stated that they will be looking at who audited for 30th June 2020 and identify auditors who are in breach of the APES 110 code and help them comply with the new code.

ATO will be writing letters to auditors in early 2021 to auditors who are found to be in breach. The education phase has been extended to June 2021 during which your audit structure should be changed. The rule will be enforced starting 1^st July 2021.

Click here to Register & get 10 free funds to try 

What does this mean for your business?

You can either give up your audit and continue with the accounting division

or

Outsource your audits to another firm

or

Attend  our webinar on 14^th October 2020 to learn more

 

 

 

 

 

FREE Webinar 14^th October 2020

NEW APES 110 RULES on SMSF Auditor Independent Requirements

14^th October 2020, 2:00 PM to 3:00 PM.

For booking the webinar, please go to our Webinar tab on the main website homepage.

 

New SMSF Audit Report is Online

Changes have been made to the Self-managed super fund independent auditor’s report (IAR) (NAT 11466-07.2019) effective for reporting periods starting on or after 1st July 2019. This form replaces the previous IAR that was effective for reporting periods on or after 1st July 2016. You must use the new form for reporting periods starting on or after 1st July 2019.

We will be discussing:

• Circumstances when you Can & Cannot Audit a fund where Accounts are prepared by your firm
• What auditors must do to protect to not breach the new Independence requirements
• What changes you should make in your Accounting firm now to retain the audit work

 

FREE WEBINAR

To explain the changes in the Audit Report attend our free webinar

When: 14th October 2020

Time: 2.00 PM To 3.00 PM

How to Book: https://www.onlinesmsfaudit.com.au/BookWebinar.aspx

Cost: Free

 

Thank you

 

We continue to strive to make useful enhancements to the software to bring in more efficiency for auditors to carry out fully compliant audits effectively.

Should you want any additional feature, do not hesitate to contact me directly. Thank you for your continued support.

Manoj Abichandani

manoj@ucservices.com.au   0411 56 46 26