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Competent Auditors required for SMSFs

With the growing number of self managed superannuation funds (SMSFs) and the value of savings accumulating in these funds, it is vital that these assets are protected and that these funds comply with legislation and their obligations. The skills of auditors of SMSFs will play an important role in ensuring this occurs.

Recently, the Institute of Chartered Accountants in Australia, CPA Australia, and the National Institute of Accountants, in conjunction with the ATO, as regulator of SMSFs, conducted a joint venture dialogue to develop a set of minimum competency requirements for SMSF auditors.

Competency requirements are to be introduced for the financial reporting periods commencing from 1 July 2008, under five key areas:

• client acceptance and retention;
• audit planning;
• controls, evaluation and testing ;
• substantive testing; and
• forming an opinion.

It is mandatory for members of the accounting bodies undertaking SMSF audits to meet the following requirements:

• hold a practising certificate issued by the professional accounting body of which they are a member;
• have relevant Professional Indemnity Insurance cover;
• undertake Continuing Professional Development as set out in the requirements of the practicing certificate they hold; and
• ensure that those who perform work on their behalf have appropriate knowledge and experience, and are properly supervised in the conduct of the audit.

The three professional accounting bodies have advised that they are committed to ensuring that the competency requirements for SMSF audits are implemented and will monitor this as part of their normal quality review programs. They have advised that they will continue to liaise with stakeholders such as the Auditing and Assurance Standards Board and the ATO to ensure that SMSF audits are carried out with high standards.

There are approximately 14,000 SMSF auditors throughout Australia, with 95 per cent of these auditing fewer than five funds a year. The ATO is concerned that a large number of SMSF auditors may lack the necessary skills and expertise to adequately carry out an audit. As a result, the ATO will target what it considers to be “high-risk” SMSF auditors. Their specific focus will be on:

• loan arrangements;
• funds identified with contraventions but with no accompanying qualified audit report;
• a lack of independence of SMSF auditors where the accounts of the SMSF were prepared by the same person carrying out the audit; and
• non-complying funds.