Industry concerns about the Government’s proposal for a three-year audit cycle for some SMSFs are not being taken seriously, according to an accounting body.
The Government announced in the latest Federal Budget that some SMSFs would only need to be audited every three years, instead of annually – subject to the passage of legislation.
The Institute of Public Accountants (IPA) says the proposal shows a lack of understanding or respect for the work of SMSF auditors.
“Key concerns raised throughout the consultation period seem to be falling on deaf ears,” said IPA CEO Andrew Conway.
“Instead, we read glib responses made in the Government’s discussion paper that concerns ‘will be mitigated by appropriate eligibility criteria and, if necessary, transitional arrangements’,” he said.
“Considering the concerns we have already raised along with other stakeholders, we find this statement to be unhelpful and in fact, downplays the important role that SMSF auditors perform in the regulatory oversight of trustees.”
“While we appreciate that some concerns can be mitigated, for Treasury to be so categorical that they will be, may be an indication of a lack of understanding of SMSF procedures and the environment that SMSFs operate under.”
Conway said there are some risks from three-year SMSF audits that can’t be mitigated by eligibility criteria – such as checking assets are held in the right name.
“Moving to a three-yearly audit cycle based on a good compliance track record does not show what happens behind the scenes at the desk of an auditor. Not all breaches by trustees end up being reported as contraventions, thanks to the good work of auditors.”
Also, without the annual management letter raising minor issues and providing preventative and educational advice, Mr Conway fears there will be a “spike” in contraventions which otherwise could have been avoided.
“A well-functioning SMSF sector is a by-product of good regulation. The SMSF auditor plays a vital role in providing the regulator with assurances that SMSF trustees are playing by the rules.
“The ATO cannot mitigate all risks by monitoring superannuation annual returns (SARs) as suggested in the discussion paper.”
“Trustees should see an annual audit as a safeguard and a form of insurance against potential, significant penalties that can be imposed by the ATO for contraventions. The role of the auditor recognises the need to protect some trustees from themselves.”