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Auditor Independence
can I audit the SMSF clients of a CA firm and can at the same time that CA firm audit my SMSF clients? is this a breach of the independence requirement set out in APES 110?
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Hi Riad
The general industry & regulator view is that 2 firms cannot swap SMSF audits as this would be a breach of the independence rules.
SMSF auditors have to comply with the auditor independence requirements set by the Accounting and Professional Ethics Standards Board (APESB). Refer APES 110.
Guidance on reciprocal SMSF audit arrangements is explained at “APESB – Independence Guide – 5th Edition, May 2020”. The Guide explains the relevant independence threats and the lack of available safeguards.
The guide can be found at:
https://apesb.org.au/uploads/home/27052020043807_APESB_Independence_Guide_May_2020.pdf
Refer scenario 9 & it states:
“If the circumstances creating the threats cannot be eliminated, and if appropriate safeguards are not available or capable of being applied, each auditor must decline the engagements and end the reciprocal arrangement.”
The ATO also states re reciprocal SMSF audit arrangements at:
https://www.ato.gov.au/misc/downloads/pdf/qc57580.pdf
“It is the view of ATO and ASIC that there are no safeguards that can reduce the threats to independence arising from this type of arrangement.”
Further the ATO states:
“Approved SMSF auditors who continue to engage in reciprocal auditing arrangements are subject to increased scrutiny. Referral to ASIC may result if we consider SMSF auditors have failed to meet the independence requirements.”
Thanks
SMSF AAA