SMSF auditors – don’t make the ASIC walk of shame

Since early 2013 the ATO and ASIC have regulated SMSF auditors. The ATO reviews the auditor’s work and if necessary refers them to ASIC for further investigation and enforcement action. The ATO’s detailed guidelines on referring an SMSF auditor to ASIC are published in Practice Statement PS LA 2018/1, which was published in late 2018.

Under the guidelines, SMSF auditors are referred to ASIC if the ATO considers that the auditor:

is not a ‘fit and proper person’ to be an approved SMSF auditor,
has not conducted the audit as required by the SIS Act or regulations, or
has not performed any of their duties and functions as required under the SIS Act or other laws.

The Courts and Tribunals view the actions of an SMSF auditor seriously and have no hesitation in disqualifying an auditor who is considered not to be a ‘fit and proper person’ or do not satisfy any of the other requirements of s128P of the SIS Act.

Examples, include SMSF auditors being disqualified because they failed to undertake the fund’s audit as they claimed. Other issues include auditor’s not complying with auditing and assurance standards, meeting the independence requirements and not being fit and proper to remain an SMSF auditor.

The ATO is currently undertaking a review of about 16,500 funds where the valuation of real estate owned by the fund does not appear to be on a market value basis as required by SIS regulation 8.02B. An auditor is required to examine the process the trustee has in place for valuing all of the SMSF’s assets. Failure to meet the auditing and assurance standards, including the process involved in valuing the fund’s assets, may result in the auditor being referred to ASIC for further investigation and enforcement action.

There has been a significant increase in the number of SMSF auditors being referred by the ATO to ASIC. On average there is about one SMSF auditor being referred to ASIC each week and it is understood that more than 50 SMSF auditors will be referred.

Make sure you are not on the ATO’s list that refers you to ASIC.