After an investigation into cheap audits in the 2016/17 financial year, the Australian Tax Office has expressed concerns with low-cost audits and referred several of them to ASIC.
The ATO has focused on the activities related to cheap audits that come with a total fee of around $899.
It appears that some of these auditors have not completed written audit plans, trustee representation letters and compliance check lists. Some have breached independence requirements as they prepared financial accounts for some SMSF audit clients.
Some of the auditors have not verified fund assets and the terms and structures of limited recourse borrowing arrangements within specific SMSFs.
Some have not retained documentation or identified and reported material contraventions to the ATO in accordance with the standards. An SMSF auditor should document, maintain and comply with auditing and assurance standards and comply with auditor independence requirements.
Some have not completed continuing professional development as required. An SMSF auditor should complete a minimum of 120 hours of continuing professional development training every three years, which must include 30 hours of training on superannuation of which at least 8 hours of training is about SMSFs.
An SMSF auditor must at all times maintain a professional indemnity insurance policy which either complies with the level set under a limitation of liability scheme provided by a professional organisation or has a minimum insured amount of $500,000 together with adequate policy terms covering civil liability claims in respect of SMSF audits.
There is also an audit limitation of 50 and a policy that restricts the audit of any SMSF of which the auditor is related to its tax agent.
The consequences for the funds are enormous as many are required to undertake re-audit. About 9% of SMSFs are audited by low-cost auditors and out of the 6,000 active SMSF auditors, around 8% are low-cost auditors.
ASIC has recently deregistered about 100 non-compliant auditors. Note however that there are still some audits that were provided for a low fee and still performed to a high standard.
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