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We have an external auditor, he has audited one of our client's smsf for more than 10 years. Can he continue to audit the same client from 1/7/2021? or is there a limit imposed by the authority?
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Hi Manita
Thanks, my view is the Independence Guide would have been prepared on the basis that an auditor is normally doing an audit each year for 10 years not 10 years of audits over 3 years. On that basis I think it is reasonable to argue that there is less of a self-interest or familiarity threats to independence given the 10 years of audits were done over a 3 year period.
If the auditor had any concerns they should consider the safeguards that were raised.
Thanks
SMSf AAA
Hi Manita
This exact example is covered in the APESB Independence guide found in chapter 8 re SMSF's.
"Scenario 13 – The auditor has a small client base in regional NSW and has been auditing XYZ SMSF for in excess of 10 years and no internal or external independence review has been undertaken."
The guide states:
"As the auditor has been auditing XYZ SMSF’s financial statements for in excess of 10 years, a reasonable and informed third party would likely consider threats to independence are not at an acceptable level and would need to be addressed by the auditor. "
The answer is the audit can be done as long as the threats to independence are addressed. It could be addressed by:
1) depending on size of audit firm rotate the auditor, or
2) have an appropriate reviewer not involved in the audit to review the auditor’s work, and or
3) perform an internal or external independent review of the audit.
The guide states if the threats to independence cannot be reduced to an acceptable level then the audit must be declined.
Thanks
SMSF AAA