We have recently seen the government release their exposure draft and explanatory memorandum relating to the proposed registration of SMSF auditors. This proposal forms part of the stronger super movement underway. Treasury have now release the draft regulations for comment and you have until Friday 26 October to comment if you wish. You can do this electronically too.
We are happy to see some final certainty around this proposal. The recommendation is that:
- SMSF auditors will need to meet a fit and proper test
- They will have to hold a tertiary accounting qualification that includes an audit component
- Hold professional indemnity insurance
- Have 300 hours of SMSF audit specific experience in the three years prior to registration, subject to some transitional arrangements, and
- Pass a competency exam, subject to transitional arrangements.
The government and ATO understand that with the hundreds of thousands of SMSF’s out there, they are extremely reliant upon the auditors handling the fund audit to identify any issues and report problems accordingly. The super system review identified some problems with SMSF auditors in that almost 29% of auditors were actually at high risk in that they were also the fund accountant and had prepared a material part of its financial statements. You may not have even thought this to be a problem, but there is a professional obligation to retain audit independence, so who is your auditor?
Also, 28% of auditors exhibited evidence of a relationship or conflict of interest that might impact the auditor’s ability to be independent.
There was some sense in the proposed legislation though, in that only those auditors who have audited less than 20 SMSF’s in the 12 months preceding registration will be required to pass a competency exam and will be able to do so from 1 July 2013. This exam will be developed by ASIC and all SMSF auditors will need to apply for registration from 31 January 2013.
So, as trustee of your own SMSF, you need to be asking, “who is my auditor?” and “are they independent”? Also please make sure you check that they are registered or at least apply for registration after January 2013 as you do not want to have your fund audited by an unregistered auditor now do you?