The ATO will be taking a close look at SMSF audit quality, and cost, as part of its 2016/17 compliance program.
“A key component of our program of work for 2016-17 is directed towards reviewing audit quality, with a focus on ‘low-cost auditors’,” James O’Halloran, ATO Deputy Commissioner Superannuation, told the CPA Australia National SMSF Conference.
“This follows industry concerns about whether the quality of audits from some low-cost providers is sufficient to meet industry standards.”
“We appreciate the number of factors that could explain the prevalence of low-cost providers, such as a competitive market, economies of scale, and systemisation or automation of elements of audits and offshoring arrangements.”
Mr O’Halloran said the ATO was pleased where low-cost auditors were producing quality work, but was also listening to industry concern that some auditors were not conducting quality audits, or not performing the audits at all.
“To date, we have found that even though advertised low costs are widespread, many auditors only advertise low fees as a starting point for basic audits which rise on a sliding scale for more complex work.”
“We’re more concerned with auditors who guarantee low-cost audits that don’t consider a fund’s complexity. We become even more concerned where this is coupled with guaranteed short turnaround times. It’s these features that alert us to conduct compliance checks.”
“No doubt it is in all our interests to ensure that auditors are undertaking quality and independent audits. Where we identify a low-cost auditor not completing quality audits we will take further action. We don’t want to see diligent auditors losing clients to these sorts of operators.”
In 2015/16 there was a 38% decrease in the number of funds with enforceable undertakings, the conference was told. However there was a 70% increase in the number of rectification directions issued by the ATO – likely reflecting a shift to the newer compliance power.
“Pleasingly, there was a small reduction in the number of trustees disqualified and a significant reduction in the number of funds made non-compliant; however, there was an increase of 54 percent educational directions,” Mr O’Halloran said.