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18-326MR Self-managed superannuation funds auditor enforcement actions
ASIC has deregistered, suspended or imposed conditions on 101 self-managed superannuation funds (SMSF) auditors for audit quality and independence issues or on fit and proper person criteria since the registration of SMSF auditors began in 2013.
To 30 June 2018 ASIC has considered the conduct of over 120 SMSF auditors, including 98 matters referred from the Australian Taxation Office (ATO). ASIC has removed 76 SMSF auditors from the auditor register, suspended one auditor for a period, and imposed conditions on the registrations of a further 24 auditors.
‘Self-managed superannuation fund (SMSF) auditors perform an important role in giving independent assurance over fund financial reports and reporting non-compliances with fund requirements. As gatekeepers, they are expected to adhere to the highest standards in the performance of their role. ASIC will continue to take action where the conduct of SMSF auditors is inadequate,’ ASIC Commissioner John Price said.
ASIC’s actions in relation to the 101 auditors, related to:
- not meeting auditor independence requirements, including auditing their own fund, a family member’s fund, a business partner’s fund, or funds for which the auditor has also been responsible for preparing accounts or financial statements;
- not complying with auditing standards, including not planning or properly performing audits, not obtaining sufficient appropriate audit evidence and not adequately documenting audit work. These cases included deficiencies in auditing asset values and the treatment of limited recourse borrowing arrangements in fund financial reports;
- not identifying or reporting non-compliances, including non-compliance with fund trustee composition and ownership of assets requirements, as well as the sole purpose test; and
- not meeting a fit and proper person requirement, including providing false and misleading statements, insolvency or bankruptcy, fraud, not managing their own tax compliance, not cooperating with enquiries by the ATO or ASIC, and breaches of their duties as a registered company auditor.
The types of further conditions imposed by ASIC have included:
- Restrictions on the funds that can be audited, including under specific independence circumstances
- Limiting the number of SMSF audits that can be conducted
- Having audits peer reviewed, with the results being reported to ASIC
- Additional training requirements
- Passing the SMSF auditor competency exam
- Strict timeframes for responding to the ATO or ASIC
- Providing notice of registration conditions to professional associations
Since 1 July 2013, the Superannuation Industry (Supervision) Act 1993 (SIS Act) requires all auditors of SMSFs to be registered with ASIC. Under the SIS Act, ASIC also has responsibility for setting competency standards and imposing any administrative standards. This is to ensure that all SMSF auditors meet the required standards of competency and expertise.
We work closely with ATO as co-regulators of SMSF auditors. The ATO monitors the conduct of these auditors and may refer compliance matters to ASIC as the registration body.
Enforcement options available to ASIC include disqualification, suspension, cancellation or imposing further conditions on registration. ASIC is not limited in terms of the nature or type of conditions that it may place on a person’s registration and determines appropriate conditions on a case-by-case basis.
ASIC may cancel an SMSF auditor's registration if they have not performed any significant audit work during a continuous period of 5 years, and, as a result, has ceased to have the practical experience necessary for carrying out audits of SMSF.