Getting to know your auditor

Founder and CEO of Engage Super Audits
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If you run your own SMSF, you are required by law to have the fund audited annually. But when was the last time you actually paid attention to who audits your fund and whether they are the right auditor for you?

You may not be aware that as a trustee, you have the ability to choose your own SMSF auditor. Your auditor works FOR YOU, and is largely there to provide you with assurance that the decisions you have made, and any advice you have received during the year, complies with the law. They are also there to educate you in your role as Trustee, and can be a vital source of assistance should anything go wrong.

Being actively involved in the process of appointing a high quality SMSF audit specialist for your SMSF is really important. Did you know over 60% of SMSF auditors in Australia audit less than 20 funds per year? That makes it very hard for most of them to stay on top of the current rules and strategies.

If you want to find the best auditor for your SMSF, you should be asking the following questions:

1.Is your auditor an ASIC registered SMSF auditor?

Your SMSF auditor will be required to be registered with ASIC from 1 July 2013 to be able to continue providing audit services to SMSFs.

The new regime applies to ALL SMSF auditors – failure to successfully register with ASIC means your auditor can no longer audit your SMSF for you.

In general, SMSF auditors will need to achieve the following to become registered:

  • Hold tertiary qualifications that include an audit component, or complete an audit study program via a professional accounting body;
  • Meet the fit and proper person test;
  • Hold Professional Indemnity Insurance;
  • Have 300 hours of SMSF audit experience in the three years prior to registration; and
  • Pass a competency exam.

Existing SMSF auditors will be given special recognition via transitional arrangements which water down the need for experience and passing an exam. So it’s important that you also try to look for an auditor who holds a specialist qualification such as SMSF Specialist Auditor (SSAud) or the ICAA SMSF Specialist designation.

Your auditor should be highly qualified, more qualified than your accountant/adviser in fact!

2. Is your auditor Independent from your accountant/advisor?

SMSF auditor independence is a fundamental and significant part of the new regime. What is the relationship between your accountant/advisor and your auditor? Have you ever asked this question?

Unfortunately it is highly common for SMSF auditors to be appointed on behalf of trustees by their accountant, and the auditor chosen by the accountant comes from the same accounting firm or network.

This may be legal, or it may not be, depending on the controls put in place by the accounting firm. But you need to decide whether it is appropriate that the auditor providing you with their opinion on your fund’s compliance with the law comes from the same firm that provided you with advice throughout the year.

If your auditor is not completely independent from your accountant/adviser, there are greater risks for you as a trustee. The majority of funds penalised by the ATO for non-compliance have had an auditor who is not Independent from the accountant/advisor. This is a very serious issue, and extremely common.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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