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With the regulators flagging a focus on low-cost SMSF audits in 2019 and recent cases involving auditors being held liable for investment losses, a pricing model shake-up for the cheaper end of the market could be in the works.
Litigation cases such as Cam & Bear Pty Ltd v McGoldrick and Ryan Wealth Holdings Pty Ltd v Baumgartner have meant that SMSF auditors now need to look much more closely at the underlying assets of funds to ensure they are recoverable.
Both the ATO and ASIC have also been keeping a close eye on the practices of auditors, and have heralded their intentions for several years to more closely monitor bundled packages and cut-price services. More broadly, SMSF auditors are an ongoing compliance focus for the regulators, and have been since the introduction of SMSF auditor registration in 2013.
Given the extra time and effort that’s now required in completing the audit, particularly for funds with more complex assets, Hayes Knight director of SMSF services Ray Itaoui said that, realistically, some of the cheaper audit providers will have to move to a staggered fee model for complex funds.
“Sometimes where they do a really large number of funds, they can absorb the cost of these more complex funds and spread the cost across simpler funds, but ongoing, that standard type of pricing would need to be broken up into different price [brackets],” Mr Itaoui said.
Where the audit firm is able to rely more heavily on the efficiencies of systems and streamlined processes for a fund, they may still be able to keep the cost lower, but they will have to charge more funds with more complex assets that can’t just be funnelled through the system.
“They’re having to go back and adjust pricing and that’s where I suspect price increases may start to creep in across the profession,” he said.
DBA Lawyers special counsel Bryce Figot agreed that it will be difficult for audit firms to run a profitable auditing business by charging flat fees or around $300 to $400 for all funds.
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