ASIC has taken action against six self-managed superannuation fund (SMSF) auditors for breaches of independence requirements and auditing standards.
Over the period 29 June 2022 to 30 September 2022, ASIC:
- disqualified three SMSF auditors from being registered
- imposed additional conditions on the registration of one SMSF auditor, and
- cancelled the registration of two SMSF auditors.
Five of these SMSF auditors were referred to ASIC by the Australian Taxation Office (ATO). One SMSF auditor did not comply with conditions imposed by ASIC on their SMSF auditor registration.
These actions resulted from breaches of obligations including auditing and assurance standards, independence requirements, and registration conditions, or because ASIC was satisfied the individual was not a fit and proper person to remain registered.
ASIC Commissioner Sean Hughes said, 'SMSF auditors have a fundamental role in promoting confidence in the SMSF sector. ASIC will apply a range of regulatory tools against SMSF auditors who fail to meet the independence and auditing standards or whose conduct calls into question the integrity of SMSF audits.'
Disqualification of SMSF auditor registration
Khanh Huynh, of Leumeah, New South Wales, was disqualified from being an SMSF auditor in June 2022 for:
- significant breaches of auditor independence requirements when he:
- audited SMSFs for which he or his staff prepared the financial statements;
- received a large proportion of his fees from SMSF audit clients from one source; and
- had a close relationship with the source that he relied on to communicate with fund trustees for him on audit matters.
- failing to comply with auditing and assurance standards by:
- not obtaining sufficient evidence to support: the ownership and market value of property, a borrowing arrangement met applicable restrictions, the storage of collectibles, a fund's claim for exempt current pension income, share sales and a capital gain, that five funds met the definition of an SMSF;
- not verifying employer contributions over the concessional cap or considering if a member was liable to pay tax on the excess amount and not verifying an in-house asset identified by the fund accountant;
- not issuing an engagement letter or obtaining written trustee representations for one fund audit; and
- not communicating matters to the trustees, retaining signed financial statements or issuing auditor's reports in the approved form. One audit report was unsigned.
- failing to provide evidence of compliance with continuing professional development requirements and a current policy of professional indemnity insurance
- failing to lodge with ASIC four SMSF auditor annual statements
- otherwise not being a fit and proper person to be an SMSF auditor for failing to comply with requests from and engage with ASIC and the ATO, including not providing two audit files for review.
Hafiz Saroha, of South Granville, New South Wales, was disqualified from being an SMSF auditor in August 2022 for:
- failing to make adequate auditor independence assessments;
- failing to comply with auditing and assurance standards, including failing to obtain or adequately document sufficient appropriate audit evidence about:
- assets being recorded at market value, being in compliance with arm's length provisions and holding assets separate to those held personally by trustees; and
- compliance with requirements relating to: fund structure, trustee declarations, signing financial statements, keeping minutes, borrowings and investment strategies.
- failing to lodge with ASIC two SMSF auditor annual statements
- otherwise not being a fit and proper person to be an SMSF auditor because for his own SMSF he failed to appoint an auditor, lodge returns on time and correct returns with errors in a timely manner.
Janette Townshend, of Templestowe, Victoria, was disqualified from being an approved SMSF auditor in August 2022 for auditing a fund where her spouse was a member and a director of the corporate trustee, over a number of years. Ms Townshend has applied to the Administrative Appeals Tribunal for the disqualification decision to be reviewed.
Conditions imposed on SMSF auditor registration
Yaw Boadi, of Constitution Hill, New South Wales, had additional conditions imposed on his registration in September 2022 for breaching Australian auditing and assurance standards by not obtaining sufficient appropriate audit evidence in relation to the valuation of an investment in unlisted shares, recoverability of a loan, verifying property title and ensuring property leases are at arm's length, and by not adequately evidencing reasons for decisions and review of work undertaken by others.
The requirements of the conditions are:
- to have SMSF audit tools, templates and methodology and three SMSF audit files reviewed by an independent SMSF auditor; and
- to provide notification of the additional conditions to his professional accounting association.
ASIC initiated SMSF auditor registration cancellation
ASIC has cancelled the SMSF auditor registration of:
Brian Carroll, of Miranda, New South Wales, in July 2022 for failing to lodge with ASIC an SMSF auditor annual statement and for not meeting the following additional conditions imposed on his registration (refer 22-075MR):
- to undertake a course on conducting SMSF audits and SMSF auditor independence;
- to review and revise SMSF audit tools and templates;
- to have five SMSF audit files reviewed by an independent SMSF auditor;
- to provide notification of the additional conditions to his professional accounting association' and
- to pass ASIC's SMSF auditor competency exam.
Linda Ingham, of St Kilda, Victoria, in August 2022 for failing to lodge five SMSF auditor annual statements with ASIC.
Background
Approved SMSF auditors are registered with ASIC under the Superannuation Industry (Supervision) Act 1993 (SIS Act).
ASIC and the ATO work closely together as co-regulators of SMSF auditors. The ATO monitors SMSF auditor conduct and can refer matters to ASIC. ASIC also monitors the SMSF auditor population for non-compliance and is empowered to disqualify, suspend, cancel or impose additional conditions on the registration of SMSF auditors.
ASIC may make an order disqualifying or suspending a person from being an approved SMSF auditor, under section 130F of the SIS Act, if the person has failed to carry out or perform adequately and properly the duties and functions of an auditor or is not a fit and proper person to be an approved SMSF auditor. A disqualified SMSF auditor is placed on ASIC's public banned and disqualified register at connectonline.asic.gov.au and is not eligible to reapply for registration.
ASIC may impose conditions on an SMSF auditor's registration under section 128D of the SIS Act. ASIC monitors compliance with conditions imposed on SMSF auditor registrations, taking further action if conditions are not met.
SMSF auditors have the right to appeal decisions ASIC makes in relation to them under the SIS Act. They may request that ASIC reconsider a decision it has made against them. If the decision is confirmed or varied the SMSF auditor may apply to the Administrative Appeals Tribunal for further review of the decision.
Further information can be found on ASIC's website and in Regulatory Guide 243 Registration of self-managed superannuation fund auditors.
SMSF trustees and members can check whether their auditor is registered, suspended or has conditions imposed on their registration by searching ASIC's SMSF Auditor register.
