audit & compliance presentation

AUDIT AND

COMPLIANCE

Jo Heighway

ENGAGE Super Audits

SMSF Auditor Registration

New Legislation for SMSF Auditors

Exposure Draft legislation and Explanatory Memorandum

is available on Treasury’s Stronger Super website (closed

for public comment)

SMSF auditors will be required to be registered with ASIC

from 1 July 2013 to conduct SMSF audits after that date

The new regime applies to ALL SMSF auditors

Short window of opportunity to take advantage of the

proposed transitional arrangements


Criteria for registration as a new SMSF auditor

Hold tertiary qualifications that either includes an audit

component, or complete an audit study program via a

professional accounting body

Meet the fit and proper person test

Hold Professional Indemnity Insurance

Have 300 hours of SMSF audit experience in the three

years prior to registration

Pass a competency exam


Transitional arrangements for existing SMSF auditors

Competency Exam – SMSF Auditors who sign off 20 or

more SMSF audits in the 12mth period prior to applying for

registration will not be required to sit a competency exam

to become registered as an SMSF auditor

SMSF Audit Experience - SMSF Auditors who have signed

off an SMSF audit within a 12 month period will be exempt

from the hours based experience requirement when

registering

The latest ATO statistics indicate that more than 60% of

current approved auditors audit less than 20 SMSF audits


Cost of registration

Initial registration $100

Competency test $100

Ongoing annual renewal $ 50

Other Costs?


Ongoing Requirements

ASIC will be the new registration body for approved SMSF

auditors

ATO will oversee audit compliance with the relevant

standards and refer non-compliant auditors to ASIC

120 hours of relevant Continuing Professional

Development (CPD) training over three years

Adhere to APES 110 – Code of Ethics for professional

accountants as part of their ongoing registration obligations

Provide an annual statement to ASIC in the approved form

within 30 days of the end of every 12mth period following

successful registration

ASIC will maintain a register of SMSF Approved Auditors

and also a register of Disqualified SMSF Auditors.


Further detail required

Absence of draft regulations

Transitional arrangements are not covered in the draft

legislation and EM

The requirement for existing auditors to register prior to 1

July 2013 to utilise transitional arrangements

Requirement for a tertiary accounting qualification

Clarification of minimum PI cover requirements

A register of ceased SMSF auditors?

Fees imposed on anyone accessing the register of

approved and deregistered SMSF auditors

Amendments to Section 131A The Regulator may Refer

Matters to a Professional Association

Auditor Independence

APES 110 and the new regime

SMSF Auditor independence is a fundamental and

significant part of the new regime

The Federal government announced in Sep-11 that under

the new regime, all SMSF auditors must comply with the

standard of independence contained in APES110 – Code

of Ethics for Professional Accountants, section 290.

From 1 January 2013, auditors will need to include a

statement in their audit report as to the extent of their

compliance with the auditor independence requirements


Independence Guidelines

“Independence guide: Interpretations in a co-regulatory

environment”

Independence is defined as both:

Independence of mind, AND

Independence of appearance

Threats to independence:

Self interest

Self review

Advocacy

Familiarity

Intimidation


Specific Examples

Independence will not be achieved in the following

situations:

The financial statements of the SMSF are prepared by

the SMSF auditor eg sole practitioner or no segregation

of the accounting and audit roles

Auditing a partner’s personal SMSF

Auditing an SMSF where you or a family member are a

member/Trustee

Auditing an SMSF where financial planning advice has

been provided by your firm

Swapping SMSF audits between firms where threats to

independence have not been mitigated


Specific Examples

Independence will be achieved where:

The accounting and audit roles are segregated to be

performed by different staff AND partners, where

financial planning advice has not been provided by the

firm and all other threats to actual and perceived

independence have been mitigated

The SMSF audit function is outsourced under an

arrangement that does not impact on actual or perceived

independence


Other factors to consider

Your auditor plays a vital role in your quality control

Practice profitability

Risk reduction for yourself, your firm and your client

Reputation & Branding

Skills shortages or over-reliance on individuals

Expanding your knowledge pool

Turnaround

Client relationships and retention

Stress/health impact of stress in partnership relationships

Addressing perceived independence from the client’s

perspective

Access to ongoing high level technical support

Hot Audit Issues for 2012/13

The Auditor’s Top 5 Hot Audit Issues

In-specie off-market transfers of assets into super

Limited Recourse Borrowing Arrangements (LRBAs)

Contribution Caps

Minimum/Maximum Pension standards

Related party transactions

Hot Audit Issues for 2012/13

The ATO’s Hit List

The Top 200 richest SMSFs

New SMSFs

Excess contributions tax (ECT)

Non arms length income

Exempt current pension income

Losses incurred by an SMSF

Benefit reporting

Lodgement

Approved Auditors

The Auditor’s Role in Rectification

The Strategic Auditor

The importance of rectification

Consultation during the audit process

Accurate & complete reporting in the ACR

Rectification support to Trustees via audit management

letters

Flag potential future compliance issues for Trustees

attention (proactive compliance support)

Specialist expertise to recommend the best course of

action to rectify complex breaches

Trustee education

Impact of Technology on

SMSF Auditors

The growth of online SMSF audit specialists providing

greater choice and increased accessibility

Paperless audit office

Working with SMSF administration technology

Latest developments:

Audits on Demand

Strategic Audit

Enhanced audit methodologies

Capturing data from the source.

Relationships remain crucial

The Future – real time auditing

© Jo Heighway, ENGAGE Super Audits 2012

Disclaimer: The material and opinions in this paper are those of the author and not those of The Tax Institute. The Tax

Institute did not review the contents of this presentation and does not have any view as to its accuracy. The material and

opinions in the paper should not be used or treated as professional advice and readers should rely on their own enquiries

in making any decisions concerning their own interests.

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