The die is now cast – following the government’s response to the Cooper Review, ASIC will be appointed as the registration body for self-managed super fund (SMSF) auditors. Having a registration body for SMSF auditors is good for the industry and consumers, although I believe the ATO is better placed to undertake this function by building on and improving the existing reporting framework. Despite who the registrar is, a formal registration will enhance the integrity of the audit function and, regardless of registration requirements for individuals, will encourage auditors to evaluate their own suitability to undertake SMSF audits, (i.e. ‘Is it worth registering when I only undertake a few audits per year?’)
A lot of SMSF service providers will be wondering if they will have to change the way they do business, so the million dollar question is: ‘How did the government respond to Jeremy Cooper’s view on mandatory outsourcing of all SMSF audit services to address auditor independence issues?’
The answer is that the government didn’t specifically address mandatory outsourcing. What it did say was that approved auditors would need to meet independence standards as part of their ongoing registration and directed ASIC to examine existing auditor independence standards that may be applied.
As I have been saying for a long time (and to everyone that will listen), mandatory outsourcing of audits will NOT ensure independence. In fact, it may even facilitate attempts to circumvent independence! Robust professional and ethical standards, which cover independence issues, already apply to 95% of SMSF auditors - those who are members of one of the three professional accounting bodies. ASIC now needs to make sure those standards apply to 100% of SMSF auditors.
It's a great point that outsourcing alone doesn't guarantee independence - of course any outsourcing arrangement must pass the same independence standards that apply to all members of the professional accounting bodies. It's fair to say that not all outsourcing arrangements are equal - outsourcing alone doesn't guarantee independence nor does it guarantee quality for that matter!
ReplyDeleteThere are many ways an outsourced audit arrangement could fail the independence guidelines, but done properly and for the right reasons, outsourcing provides the solutions to independence that many firms just cannot find internally.
The existing independence guidelines do already point heavily towards outsourcing in many situations, but the word "mandatory" really does sound unpleasant and seems to spark emotions, perhaps more than necessary!
Mandatory outsourcing of audits wouldn't ensure independence I absolutely agree - but mandatory outsourcing of audits to a registered SMSF auditor under an arrangement that met the independence guidelines along with robust professional and ethical standards would without question greatly improve the integrity of the SMSF industry.
But then again, as you've alluded to in other blogs, there are many other reasons for choosing the right auditor who will add value that have nothing to do with independence. All the attention on independence in some respects seems to be clouding the fact that outsourcing isn't all about independence alone.
Jo Heighway
I support the outsourcing of audits as it provides a rigourous review of quality from other accountants and even forces other accountants to update their skills in certain areas of superannuation. We certainly provide and receive a fair amount of feed back in respect to our accouting and provide it in our auditing.
ReplyDeleteHowever, I am concerned that the ASIC auditor requirements will go down the lines of the "corporate" auditor and lock out many capable auditors in a specialised area. Who would want to spend some high set % of their time doing super audits in order to qualify.
The ICAA must liase with ASIC to ensure that the requirements are common sense and not too technical as to disuade members from registering.
As an SMSF administrator I see a wide range in the standard of SMSF audits. Trustees see little or no value in this compliance task.
ReplyDeleteThanks for sharing such an interesting post with us.
ReplyDeleteDiscretionary Trust
awesome blog fantastic post keep share like article really very informative for me SMSF
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