ASIC/ATO reinforce rules around SMSF auditor income reliance

The Australian Taxation Office (ATO) and the Australian Securities and Investments Commission (ASIC) have broken new ground signalling self-managed superannuation fund auditors not to become reliant on single administrators providers as a source of income.

Three SMSF auditors who had become reliant on a single administrator have had their registration suspected by ASIC for a year.

The regulator announced that the it had determined that Wuzhao Fang, Huiting Li, and Xuan Wu breached independence requirements by auditing thousands of SMSF clients from a single referral source, who is a SMSF administration provider.

It said the SMSF administration provider offers online SMSF setup and administration, including assisting the SMSF trustee comply with their tax, accounting and audit obligations.

“As a result of the SMSF administration provider engaging a limited number of SMSF auditors, these SMSF auditors received more than 99% of their overall audit fees from the online platform,” ASIC said.

“ASIC found that this created self-interest and intimidation threats to the SMSF auditors’ independence that were not able to be safeguarded against. Auditors must carefully evaluate referral arrangements, particularly where it creates a fee dependence.”

“Ms Wu’s decision was reviewed at her request and an ASIC delegate confirmed the suspension decision. ASIC’s decisions may also be reviewed at the Administrative Review Tribunal upon application by the SMSF auditor.”

ASIC said the referrals were made by the ATO.

“The ATO will continue to scrutinise the source of SMSF audit referrals and ASIC will take action where SMSF auditors fail to evaluate and address threats to their independence,” it said.