What SMSF auditor changes mean for youPUBLISHED : | UPDATED:
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Back to the books... accountants who only audit a small number of funds will have to pass a competency examination to continue auditing SMSFs after July 2013.
- The change mostly affects funds that have their audits conducted by accountants who only audit a small number of funds, say fewer than 12
- Where trustees charge a reasonable fee that reflects the work involved, there shouldn’t be any change in costs
- If a fund has an auditor who decides to get out of the business, anything the trustees can do to help the new auditor take over could save them money.
Not all self-managed (do-it-yourself) super fund trustee members will notice it, but there is an important change for fund auditors taking place from the end of January. The Australian Securities and Investments Commission is taking over the registration and supervision of about 9000 accountants involved in DIY fund auditing.
Fewer than 12
As far as DIY fund trustees are concerned, says Belinda Aisbett of specialist auditor Super Sphere, the change will mostly affect funds that have their audits conducted by accountants who only audit a small number of funds, say fewer than 12.
They’re the ones, she says, who are expected to decide the new “approved self-managed super fund (SMSF) auditor” system, with its competency tests and practical experience requirements, is not for them. Aisbett says her firm, which audits about 1000 funds, has already received inquiries from accountants and financial planners looking for a new auditor after being advised by existing auditors they will no longer continue.
Specialist auditor Craig Fishburn of Superannuation Auditors reports similar inquiries.
The reason accountants who only audit a small number of funds are likely to exit is because they will have to pass a competency examination to continue auditing DIY funds after July 1, 2013.
Although the new regime is officially accepting registration applications from the end of January 2013, all existing auditors who have signed off on at least one DIY fund over the past 12 months can apply to be registered automatically as long as they do so before July 1, 2013.
To meet this deadline, ASIC has suggested they apply before the end of April 2013. Even though it will only take one fund audit to satisfy the initial registration hurdle, where an auditor has signed off on fewer than 20 DIY funds in the previous 12 months, says Fishburn, the registration is conditional on their passing a competency examination before July 2014. Failure to pass this exam (which requires them to know all DIY super rules and regulations) will result in their registration being cancelled until they pass.
Aisbett says the new approved auditor regime could lead to thousands of DIY fund auditors dropping out of the system. There could even be 50 per cent fewer auditors in a few years, although she doesn’t expect trustees to encounter problems getting their funds audited.
Contrary to predictions by some accountancy industry sources, there shouldn’t be any DIY fund auditor shortage. That’s because the auditors most likely to depart the scene look after a handful or two of funds and sometimes even less.
Those likely to stop auditing funds are older accountants who have offered DIY fund audits as a special service to selected clients, often for a low cost. These auditors may use the registration as a catalyst for retirement.
Discounts under pressure
What about the effect on trustees? Aisbett doesn’t expect an increase in the cost of audits, although some auditors may stop offering heavily discounted services once they’ve assessed the likely impact of the change.
There are some auditors, Aisbett says, who charge ridiculously low fixed fees of $250 to $300 per audit who could be forced by the new regime to do more work. In these cases they are likely to increase fees, which may come as unwelcome news to some trustees. Aisbett believes no auditor can conduct a thorough audit for that price.
Where trustees charge a reasonable fee that reflects the work involved, there shouldn’t be any change in costs.
Aisbett says where a fund has an auditor who decides to get out of the business, anything the trustees can do to help the new auditor take over could save them money.
Making sure the fund has an up-to-date trust deed and having all permanent documents readily available (such as the fund’s investment strategy as well as any trustee declarations) will save time and trouble.
Most professional auditors have a checklist that details the information they require. This is a useful starting point. That said, the new regime won’t see any big change in the fundamental role that auditors play in DIY funds.
The job of a DIY fund auditor is to provide the fund trustees and the DIY fund regulator, the Australian Taxation Office, with independent opinions on the fund’s financial statements as well as opinions on the fund’s compliance with a range of super rules and regulations.
Mirroring of standards
As far as auditors themselves are concerned, Aisbett does not expect to see big changes flow from the new registration regime. The competency standards ASIC will be monitoring mirror what already exists. There is no real difference between the ASIC standards and those set by professional bodies, which 98 per cent of auditors already comply with.
Where auditors don’t comply, Aisbett says the new regime won’t make a big difference, unless ASIC introduces a detailed policing regime with appropriate penalties.
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John Wasiliev Smart Investor