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20-035MR ASIC moves against SMSF auditor misconduct
ASIC has moved to disqualify, or suspend and/or add conditions to the registration of, a number of auditors of self-managed superannuation funds (SMSFs).
The actions arose following ASIC concerns about failures to meet requirements including independence standards and auditing standards, failing to comply with Continuing Professional Development (CPD) requirements and otherwise not being a fit and proper person.
SMSF auditors disqualified
ASIC disqualified the following person from being an SMSF auditor:
- Philip Shugg of Victoria – for not being a fit and proper person as he was bankrupt.
Suspension and conditions imposed on SMSF auditors
ASIC suspended for one year and imposed conditions on the following SMSF auditor:
- Greg Marlow of the Northern Territory – for significant deficiencies in auditing the ownership and valuation of fund assets, lease agreements, whether transactions were on an arm’s-length basis, and compliance with personal use and collectable asset rules. He also issued an audit report in an incorrect form, and did not obtain signed financial statements.
Conditions imposed on SMSF auditors
If an auditor breaches a condition on their registration ASIC may disqualify or suspend their registration.
ASIC imposed conditions on the following SMSF auditors:
- John Redenbach of New South Wales – for deficiencies in maintaining auditor independence, and deficiencies in audit work on the ownership and valuation of fund assets and whether a transaction was on an arm’s-length basis.
- Lenneke Serjeant of New South Wales - for deficiencies in maintaining auditor independence, and deficiencies in audit work on the valuation of fund assets, lease and loan agreements, execution of trust deeds and reviewing the investment strategy by trustees.
- Angelo Covelli of Victoria - for deficiencies in audit work on the valuation of fund assets, limited recourse borrowing arrangements, lease agreements and rental statements.
- Darren Tappouras of New South Wales - for deficiencies in audit work on the ownership and valuation of fund assets, in-house asset requirements, limited recourse borrowing arrangements. He also did not obtain signed financial statements and did not comply with CPD requirements.
The conditions applied to each auditor are summarised below:
|Peer reviews||Independence assessments||Restricted audits||Professional associations||Education||Tools and templates||Exam||Proof of CPD|
The various conditions imposed across the auditors were:
- Peer reviews – Having a number of audits reviewed by an independent SMSF auditor for compliance with auditing standards.
- Independence assessments – Performing and reporting on specific independence threat assessments for all clients.
- Restricted audits – Being restricted from conducting any audits in independence threat situations regardless of any safeguards.
- Professional associations – Providing a copy of the conditions to their professional association.
- Education – Completing specific courses of study, including in ethics and audit.
- Tools and templates – Reviewing tools and templates to ensure they are up-to-date and complete.
- Exam – Sitting and passing the SMSF auditor competency exam.
- Proof of CPD - Providing proof of compliance with CPD requirements annually for three years.
Information about the above-named auditors (other than Mr Shugg) 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.
SMSF trustees and members can check whether their auditor is registered and what conditions are on their registration by searching ASIC's SMSF auditor register. ASIC also maintains a public register of disqualified SMSF auditors. ASIC’s registers are available via connectonline.asic.gov.au.