Reciprocal auditing crackdowns: Tip of iceberg

Reciprocal auditing crackdowns

Is ASIC’s enforcement of independence standards regarding reciprocal SMSF Auditing arrangements a glimpse into future crackdowns?

The APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (2018) outlined additional independence recommendations beyond the reciprocal auditing arrangements that saw 18 auditing firms disciplined this week. This action by ASIC is a jarring sign that auditors should now be on high alert.

With fee referral threshold recommendations also included in the APES 110, it’s a natural assumption that the next shots fired by ASIC will be aimed at breaches of these regulations.

The ATO has provided us with the guideline of a 20% maximum threshold of fees from a single referral source for audits, but it remains to be seen how this will be applied in reality as we enter the new financial year.

My opinion is that this will naturally be next in the line of fire, and it will impact many more auditors than the reciprocity standards.

With a number of firms expressing angst over this arbitrary threshold, I ask myself why? I’ve amassed significant knowledge over the years in our industry, however the one understanding that I have built my business and reputation on is the premise that the primary objective of auditing is, believe it or not, to be objective.

At Reliance Auditing, we are entrusted to protect the trustee’s retirement savings and identify compliance risks in relation to transactions within the SMSF.

How can auditors remain objective if their own compliance is threatened by self-interest?

If the very intention of the auditing profession is to conduct an impartial assessment of a fund’s compliance with superannuation law, then why make any concessions that might compromise that?

While the clock is ticking for firms to correct their conduct from an independence standpoint, I believe we will see many players forced to forfeit clients in order to comply. Gladly, this shake up in the industry will lead to better outcomes for all, raising the standard of our work and ultimately also improving the quality of Australian SMSFs.

This article written by Naz Randeria of Reliance Auditing Services in Perth was first published on 17 March 2022 on SMSF Adviser



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