The client is the Trustee. I can see several comments that agree with this. I have also recently had a review of my practice by the ICAANZ and one of the issues that needs to be considered before an engagement letter is sent is whether you should accept the client in the first place. One item I picked up from the Peter Bobbin webinar was to break the on-boarding down into 2 parts. The first part should be whether you wish to have the Fund as a client. Second if they pass the first process then only go to the second and issue an engagement letter to them. I think this very important because I am finding may Trustee's do not understand their responsibilities under the Act and Regulations, so it is an opportunity to directly communicate with the Trustees as to the Financial and Compliance issues. It also demonstrates true independence. There is a real need to push back responsibilities to Trustees. I get the feeling that many Trustees just think the Accountants are responsible for the Fund and that the Audit is a tick the box exercise.

Thankyou all for your comments however you all seem to miss the point that accountants can still perform an audit of an SMSF and do the tax return ( like in the old days) if they in fact only act as a compiler of the financial statement from a T/B supplied by the trustees. So in my case the accountant is engaged to do the audit. In their engagement letter they have a clause which permits them to sub contract out the provision of audit services, The Trustees agree to this process. The accountant then engages my firm (and many others) to perform these services. I do not see any mischief in this process. Independence is a state of mind not just a form. My independence is not compromised in any way as my audit review points would indicate. I do not see any mischief in this arrangement.

It is always the Fund and its trustees/Directors that engage the Auditor and all engagement letters and trustee representations should be acknowledged by the trustees/directors.

The accountant merely prepares the financial statements and ITR as well as providing any supporting documents on behalf of the Fund.

Where the Accountant exercises complete control over the client (including who should act as auditor of the Fund) independence of the auditor would be brought into question.

Agree totally with the fact that fund is the true client and you are obliged to report to them per s35C.

The accounting firm won't cover your backside if the ATO don't feel you've engaged correctly (as their recent activity and ASIC's shows), and frankly, if they are 'calling the shots', I'd argue that in fact, you aren't independent.

Independence is an 'in fact and in deed' type thing, not a case of 'we don't work in the same accounting firm and are on a different ABN, therefore we're independent'. To be honest, I think that too many accounting firms still don't want to understand what APES110 is, and expect to be the ones in control with a degree of separation, but it'll be your auditor number in the toilet if the ATO don't agree with the accounting firm.

I'd also argue that if you are doing a flat fee per fund, again, independence is questionable, and how can anyone argue that a proper audit is done, when the fee is the same regardless of complexity.

You are engaged by each fund and as such should have an engagement letter and a representation letter from each fund. Seems to me like the accountant is trying to place undue pressure on you which brings into question independence.

Your client is each fund. The accountant is placing undue pressure on you and is not acting ethically. I'd be giving them a wide birth and declining to take on them or their funds. It can only lead to heartache.

You can have an engagement letter with the accountant covering things like agreed turnaround time, number of funds passed on to you etc. However separately you must also have an engagement letter between you and the trustees. The trustees will also need to make representations to you. The accountant can pass the letter on but it would be the trustees and the auditor that are parties to both the engagement & rep letter.

In the end the trustees are your client and the accountant merely acts as an agent.

Hi Andrew

My first concern is has the SIS legislation been complied with?

Section 35C of SIS states:

"For each year of income, each trustee of a superannuation entity that is a self managed superannuation fund must ensure that an approved SMSF auditor is appointed to give the trustee or trustees a report".

My second concern is have the auditing standards been complied with in terms of the audit engagement letter? I would expect that the engagement should be between the trustees of the Fund and the auditor.

My third concern would be if ever there was any legal action taken by the trustee against the auditor I would want the engagement letter to be between the trustees of the Fund and the auditor.

Refer the attached article that explains recent claims against auditors.

https://www.smsfassociation.com/wp-content/uploads/2019/02/Technically-Speaking-Issue-50-FINAL-wo-quiz.pdf

The cases strongly support that the engagement should be between the trustees and the auditor.

If other forum members have a view please let the forum know.

Thanks

SMSF AAA