Issues we find when reviewing the performance of approved self-managed super fund (SMSF) auditors include the following:
- Auditor independence – you must comply with the independence requirements set out in the APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (2018) – effective 1 January 2020 (the Code). From 1 July 2021, we expect any auditors conducting in-house audits to ensure they comply with the restructured independence standards in the Code. For example, under the Code you cannot audit an SMSF under any circumstances if:
- your firm has assumed a management responsibility for the fund, or
- you, your staff, or your firm provides accounting or bookkeeping services to the fund (including preparing the financial statements), unless the service is routine or mechanical and appropriate safeguards are applied.
- Restructuring arrangements set up to avoid in-house audits – these will be subject to extra scrutiny by us to ensure compliance with the Code and include:
- audit pooling arrangements
- reciprocal auditing arrangements
- outsourcing to specialist firms.
- Knowledge of super laws – you must be able to understand and apply the rules governing SMSFs set out in the:
- Superannuation Industry (Supervision) Act 1993 (SISA)
- Superannuation Industry (Supervision) Regulations 1994 (SISR).
- Insufficient documentation – you must maintain a record of your audit processes and keep sufficient audit evidence to support your findings and opinions.
- Auditors who fail to obtain sufficient evidence to support their opinion in common areas such as:
- market valuations for unlisted assets
- documents supporting a limited recourse borrowing arrangement (LRBA), including obtaining the loan agreement or bare trust deed
- valuation evidence for collectibles including insurance.
- Insufficient evaluation of the evidence obtained, to show that the auditor appropriately formed an opinion on the fund’s compliance with the relevant super laws.
- Unsigned documentation, including the:
- trustee representation letter
- engagement letter
- management letter
- financial statements (in particular).
- Failure to bring immaterial breaches to the trustee's attention in a management letter – such as breaches relating to separation of assets.
- Failure to report contraventions to us – you must report all contraventions that meet the reporting criteria, even if they have been rectified during the year.
Where we find matters of concern, we will determine the appropriate action, including referral to the Australian Securities & Investments Commission (ASIC).
We will refer an approved SMSF auditor to ASIC if we form an opinion that the auditor:
- has failed to perform their duties under the SISA, or other law
- has breached a provision of the SISA or SISR, or
- is not 'fit and proper' to be an approved SMSF auditor.
You will generally be considered by us to be 'fit and proper' if you have:
- adequately and properly performed your duties and functions as an approved SMSF auditor
- a good character and appropriate professional abilities (which include competency, diligence, knowledge and soundness of judgment)
- not been subject to sanctions under any relevant laws (including laws dealing with responsibilities relating to the person's profession, honesty and business transactions).
ASIC may take action against a person who is an approved SMSF auditor, including:
- imposing a condition on an auditor’s registration
- varying a condition on an auditor’s registration
- accepting an enforceable undertaking
- cancelling an auditor’s registration
- suspending an auditor’s registration
- disqualifying a person from being an approved SMSF auditor.
- Auditor independence
- Approved SMSF auditor checklist – what we look for when auditing the auditor
- APES 110 Code of Ethics for Professional Accountants (including Independence standards) (2018) – effective 1 January 2020External Link – download from the APESB website
- APESB Independence Guide – Fifth edition, May 2020 (PDF 1.36MB)This link will download a file – this link will download a file from the APESB website
- AUASB Guidance Statement GS009 Auditing Self-managed superannuation fundsExternal Link – download from the AUASB website
- asic.gov.au/smsf-auditorExternal Link