Government ignores IPA lobbying on behalf of auditors
The Institute of Public Accountants has slammed the government’s response to concerns it has raised around the proposed three-year SMSF audit cycle, saying that they “seem to be falling on deaf ears”.
In May, IPA chief executive Andrew Conway said he was working with the government around concerns about the three-year SMSF audit cycle.
Then in June, the IPA ramped up its lobbying efforts, calling the government’s justification that the three-year cycle will reduce compliance costs “flawed or could be a cost deferral at best”. This was closely followed last month by the government opening up the proposal for consultation.
However, Mr Conway said key concerns raised throughout the consultation period “seem to be falling on deaf ears”, with the government showing a lack of understanding and respect of the important work carried out by auditors.
In particular, he cited a point made in the government’s discussion paper that concerns ‘will be mitigated by appropriate eligibility criteria and, if necessary, transitional arrangements’.
“Considering the concerns we have already raised along with other stakeholders, we find this statement to be unhelpful and in fact, downplays the important role that SMSF auditors perform in the regulatory oversight of trustees,” Mr Conway said.
“While we appreciate that some concerns can be mitigated, for Treasury to be so categorical that they will be, may be an indication of a lack of understanding of SMSF procedures and the environment that SMSFs operate under.”
Mr Conway said there are risks that cannot be mitigated by limiting access to a three-yearly audit cycle through using appropriate eligibility criteria, using an example of ensuring assets are held on trust for the super fund.
He noted that if the title is not in the name of the super fund, there is no safeguarding of assets held in trust to protect the assets from creditors or other claimants.
“Moving to a three-yearly audit cycle based on a good compliance track record does not show what happens behind the scenes at the desk of an auditor. Not all breaches by trustees end up being reported as contraventions, thanks to the good work of auditors,” Mr Conway said.
“Many fund trustees receive a management letter from the auditor, outlining minor compliance issues, preventive advice and education advice. Without this sort of timely check and balance we fear a spike in contraventions which could have been avoided.”
Finally, Mr Conway said the ATO cannot mitigate all risks by monitoring super annual returns as suggested in the discussion paper, and that the SMSF auditor plays a vital role in providing the regulator with assurances that SMSF trustees are playing by the rules.
“Trustees should see an annual audit as a safeguard and a form of insurance against potential, significant penalties that can be imposed by the ATO for contraventions. The role of the auditor recognises the need to protect some trustees from themselves,” Mr Conway said.
“A well-functioning SMSF sector is a by-product of good regulation.”