ATO assistant commissioner Dana Fleming said that high-risk auditors continue to be a key compliance focus for the ATO.
The ATO, she said, uses data holdings, information from case reviews and intelligence provided from the public to try and identify poor processes and systems and intentional failure to comply.
It also looks at auditors with a high volume of audits but a low level of audit contravention reports, where those audits are out of sync with the rest of the population, and independence breaches, she explained.
“This year alone, we have referred 37 auditors to ASIC. In some cases, this has been where auditors have been providing both auditor and tax agent services to the same fund or administration services or accounting services,” Ms Fleming said.
“Where those instances do occur, we also refer them to the Tax Practitioners Board as well.”
Since the registration of SMSF auditors with ASIC commenced in 2013, she said, the ATO has reviewed a total of 715 auditors.
“Most of them we simply work with to educate them better about how they can meet their professional obligations, but where we do see that auditors have been deficient in their practices or not complying with their obligations, we refer them to ASIC,” Ms Fleming said.
“The most common reason for referral to ASIC is for independence breaches. These are, unfortunately, often for simple reasons such as auditing their own fund, auditing a relative’s fund, providing both auditor services and tax agent services to the same fund or accounting other administrative services, and more recently reciprocal auditing arrangements where two auditors agree to audit each other’s individual funds.”
Ms Fleming said that the number of auditors that the ATO has been referring to ASIC has increased over the last three years.
“Of the 715 auditors that we’ve reviewed, we’ve referred 96 to ASIC. I think that is a reflection of the SMSF industry and how hard it is for those SMSF auditors who may only have a handful of clients to keep up to date with their obligations of being an SMSF auditor,” she said.
“Over half of those referred auditors have had their registration cancelled, most of them voluntarily, which is consistent with the fact that they only had one or two left and were probably only doing them as a favour to those clients who’ve been long-term, and really shouldn’t be doing it any longer.”