Traditionally, auditors have played a minor role in the development of Australia’s superannuation industry.
Their involvement was largely confined to running their eyes over draft account proposals by the super administration houses.
“The role of the auditor in super funds was,” notes Rice Walker Actuaries director Wayne Walker, “a once-a-year routine affair.”
Legislative and regulatory changes may have changed the type of services auditors provide super funds but, argues Walker, “their role is still extremely limited”.
As with other industries, accounting firms have tried to leverage their core function and client relationship beyond the audit. In the case of the super industry, this was in administration.
“It is nothing like their broader involvement in the corporate world,” Walker says.
“There is nothing much they can offer super funds, certainly not in the big ticket items such as asset and liability management.”
Richard Rassi, chairman of the superannuation committee of the Institute of Chartered Accountants in Australia, expects that the major accounting firms will benefit from changes to the super industry.
He does, however, anticipate accounting firms will have extra work as a result of the new licensing regime that takes effect on July 1.
“Super trustees will need help in establishing risk management strategies and plans to get licensed.”
He adds that extra work could also flow from the number of funds winding down, especially in data conversion audits where funds are wound up and data has to be accurately and completely converted and transferred to the new fund.
Walker expects the role of accountants in the super industry to diminish even further as the number of corporate super funds decline.
By contrast, Walker adds that the accounting profession has a much stronger function with respect to the do-it-yourself super market.
“The major super houses have not gone into this in a big way, leaving scope for the auditors.”
Accountants have been granted the right to provide limited advice on self-managed superannuation. This follows the Government’s decision earlier this year to grant relief from the Financial Services Reform Act (FSRA) that allows “recognised accountants” to provide advice to their clients on the decision to acquire or dispose of an interest in a self-managed superannuation fund.
At the time, Treasurer Peter Costello explained that the new regulation is intended to promote certainty for accountants and “acknowledges the important role that accountants currently play in providing a range of professional advice and expertise to their business and other clients”.
“It ensures that advice on the establishment of an SMSF, which often forms a part of overall business arrangements, is treated comparably with other FSRA exempt advice, provided to a client, such as business structuring and taxation,” Costello says.
Accountants naturally welcome the decision that allows them to continue to consult on superannuation structures.
The issue now is how difficult the accounting profession will find it to avoid providing advice about a particular superannuation fund or particular investments while ensuring that that advice does not constitute financial product advice and should not require an Australian Financial Services Licence under FSRA.
Reece Agland, technical counsel for the National Institute of Accountants, highlights the problem. “Auditors cannot do the accounts and the audit as this compromises their independence.”
Rassi notes that “auditors must be careful not to breach the requirements for independence. This means they cannot take on the design and implementation of a risk management system and conduct the audit. But there is still plenty of opportunity within the parameters without breaching the independence requirements.”
He cites offering workshops and identifying risks without getting involved in implementation.
