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Friday 8 March 2019

19-050MR ASIC acts against SMSF auditor misconduct

ASIC has acted to disqualify, suspend or add conditions to the registration of a number of auditors of self-managed superannuation funds (SMSFs).

The actions arose following ASIC concerns about audit quality, independence issues, failures to meet the fit and proper person criteria or other matters.

ASIC Commissioner John Price said, 'Self-managed superannuation fund auditors play a fundamental role in promoting confidence in the SMSF sector, so it is crucial that they adhere to ethical, auditing and professional requirements. ASIC will continue to take action where the conduct of auditors falls short’.

SMSF trustees and members can check whether their auditor is registered, or whether a person has been disqualified, by searching ASIC's SMSF auditor register: connectonline.asic.gov.au.

Actions against SMSF auditors

  • Strat Karnas of Victoria – disqualified as an SMSF auditor for:
    • failing as a trustee of his own SMSF to have the fund audited;
    • falsely representing in annual returns for his own SMSF that the fund had been audited when it had not; and
    • misusing his auditor number to lodge annual returns for his own SMSF.
  • Keith Knight of the Australian Capital Territory – disqualified as an SMSF auditor for:
    • failing as a trustee of his own SMSF to have the fund audited;
    • falsely representing in annual returns for his own SMSF that the fund had been audited when it had not;
    • misusing his auditor number to lodge annual returns for his own SMSF;
    • failing to obtain sufficient appropriate audit evidence in SMSF audits on property valuations and title of assets, which were not held in the name of the corporate trustee; and
    • failing to use the prescribed audit report format.
  • Mr Trevor Ward of New South Wales – registration as an SMSF auditor cancelled for failing to:
    • comply with continuing professional development (CPD) requirements;
    • hold an appropriate level of professional indemnity insurance; and
    • lodge annual statements for two years.
  • Ranjit Dadwal of Victoria – suspended as an SMSF auditor for two years from 30 October 2018 for not being a fit and proper person in that he had received criminal convictions for three offences.
  • Joseph Carbone of South Australia – suspended as an SMSF auditor for two years from 8 November 2018 for failing to:
    • report that an SMSF audited by him had not recorded a property at market value;
    • comply with independence requirements by auditing an SMSF where his staff prepared the accounts and financial statements; and
    • maintain appropriate records of compliance with CPD requirements.
    • ASIC also imposed conditions on Mr Carbone’s registration to:
      • sit and pass the SMSF auditor competency exam;
      • complete a course of study in relation to SMSF audit;
      • have three of his SMSF audits conducted after the suspension period reviewed by an independent SMSF auditor for compliance with auditing standards; and
      • inform his professional association about his suspension and these conditions.
  • Antonia Christine Quinn of Western Australia – conditions imposed for failing to obtain sufficient appropriate audit evidence in the audit of an SMSF on whether a lease was on an arm’s length basis, and for failing to comply with CPD requirements. The conditions require Ms Quinn to:
    • sit and pass ASIC’s SMSF auditor competency exam;
    • complete a course of study in SMSF audit;
    • have two of her SMSF audits reviewed by an independent SMSF auditor for compliance with auditing standards;
    • review and revise her SMSF audit tools and templates;
    • adhere to formal CPD requirements specified in the conditions; and
    • provide ASIC with proof that she has complied with CPD requirements annually for three years.
  • Chooi Beh of Victoria – conditions imposed for failing to obtain sufficient appropriate audit evidence in the audit of an SMSF about the value of unlisted shares and whether monies advanced to the fund were borrowings.  The conditions require Mr Beh to:
    • sit and pass ASIC’s SMSF auditor competency exam;
    • complete a course of study in SMSF audit; and
    • inform his professional associations about these conditions.

Background

Information about the abovenamed auditors (other than Mr Dadwal) was referred to ASIC by the Australian Taxation Office (ATO) under section 128P of the Superannuation Industry (Supervision) Act 1993 (SIS Act).

From 1 July 2013, the SIS Act required all auditors of SMSFs to be registered with ASIC. This was to ensure that all SMSF auditors meet the base standards of competency and expertise.

ASIC and the ATO work closely together as co-regulators of SMSF auditors. The ATO monitors SMSF auditor conduct and may refer matters to ASIC for possible action such as disqualification or suspension of their registration. ASIC may also impose conditions on an SMSF auditor.

On 26 October 2018, ASIC issued a media release on SMSF auditor enforcement actions since the registration of SMSF auditors began in 2013 to 30 June 2018 (refer: 18-326MR).

Last updated: 08/03/2019 12:00