ASIC takes action against six SMSF auditors

The Australian Securities and Investments Commission (ASIC) has disqualified three auditors and taken action against a further three following breaches of independence requirements and auditing standards.

In the September quarter ASIC disqualified three SMSF auditors from being registered, imposed additional conditions on the registration of one SMSF auditor and cancelled the registration of two SMSF auditors.

Five of these SMSF auditors were referred to ASIC by the ATO. One SMSF auditor did not comply with conditions imposed by ASIC on their SMSF auditor registration.

ASIC stated that these actions resulted from breaches of obligations including auditing and assurance standards, independence requirements and registration conditions or because ASIC was satisfied the individual was not a fit and proper person to remain registered. 

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Two of the SMSF auditors were disqualified for significant breaches of the auditor independence standards.

One of the auditors was disqualified after auditing SMSFs for which he or his staff prepared financial statements. ASIC stated that the auditor had also received a large proportion of his fees from SMSF audit clients from one source; and had a close relationship with the source that he relied on to communicate with fund trustees for him on audit matters.

Another auditor was disqualified for failing to make adequate auditor independence assessments and failing to comply with the auditing and assurance standards including the failure to obtain sufficient audit evidence.

She failed to obtain or adequately document sufficient appropriate audit evidence about:

• Assets being recorded at market value, being in compliance with arm’s length provisions and holding assets separate to those held personally by trustees; and
• Compliance with requirements relating to: fund structure, trustee declarations, signing financial statements, keeping minutes, borrowings and investment strategies.

The third auditor was disqualified from being an approved SMSF auditor in August for auditing a fund where her spouse was a member and a director of the corporate trustee over a number of years. 

This particular auditor has applied to the Administrative Appeals Tribunal for the disqualification decision to be reviewed. 

ASIC imposed conditions on one of the SMSF auditors for failing to obtain sufficient audit evidence in relation to the valuation of an investment in unlisted shares, recoverability of a loan, verifying property title and ensuring property leases were at arm’s length.

The requirements of the conditions are to have SMSF audit tools, templates and mythology and three audit files reviewed by an independent SMSF auditor and provide notification about the additional conditions to his professional accounting association.

An SMSF auditor has had his SMSF auditor registration cancelled for failing to have his audit files reviewed, pass ASIC’s SMSF auditor competency exam  and a number of other requirements. 

ASIC also cancelled the auditor registration of a sixth auditor after they failed to lodge five SMSF auditor annual statements with ASIC.

ASIC commissioner, Sean Hughes, said SMSF auditors have a fundamental role in promoting confidence in the SMSF sector. 

“ASIC will apply a range of regulatory tools against SMSF auditors who fail to meet the independence and auditing standards or whose conduct calls into question the integrity of SMSF audits,” said Hughes.