- CA ANZ has made a joint submission to fight against three-yearly audit cycles for SMSFs.
- Members say this change will not reduce audit costs for clients, but could make things more expensive.
- The current annual audit cycle reduces the risk of deliberate non-compliance and ensures early identification of inadvertent non-compliance.
The cost of auditing is likely to increase if proposed changes are made to the current regime of audit cycles for SMSFs, says Chartered Accountants Australia and New Zealand’s (CA ANZ) submission.
CA ANZ has made a joint submission with CPA Australia to fight the proposal to change mandatory yearly audits for SMSFs to once every three years, representing over 200,000 professional accountants in Australia.
With more than 90 per cent of auditors in the $712 billion SMSF industry being either a Chartered Accountant or CPA, members across the audit profession were consulted about the proposed change in preparation for the submission to Treasury, says CA ANZ Superannuation Leader Tony Negline.
“A large number of members told us that this change will not reduce audit costs for clients, it could actually make things more expensive,” said Negline.
“Auditing a SMSF involves making sure that transactions have been recorded accurately and comply with superannuation legislation.
“It is more difficult and time consuming to collect evidence that a SMSF was compliant three years ago than 12 months ago, which can make it more expensive.”
CA ANZ members are rightly concerned that this change will increase administration work and make the auditing process more expensive than if it was continued in a timely year-to-year basis
CA ANZ argued that the current audit regime serves two purposes, to reduce the risk of deliberate non-compliance and early identification of inadvertent non-compliance. Negline said changing the frequency of mandatory audits would not serve these two purposes of auditing well.
“Changing the current regime from annual audits to few and far between audits would make it easier for deliberate non-compliance to continue but also delay the identification of inadvertent non-compliance by those who genuinely want to do the right thing,” he said.
“CA ANZ members are rightly concerned that this change will increase administration work and make the auditing process more expensive than if it was continued in a timely year-to-year basis.
“We expect that most SMSF trustees who do choose a three-yearly audit will not only find that their costs are increasing, but also that it may cause them to lose confidence in their annual financial statements if they lose annual audits.
“It can be seriously problematic because it means that errors could go back three years, rather than one year which will make it more difficult to correct.”
The industry has indicated that it will continue to advise clients to have their SMSF audited every year. Members have also indicated that clients have expressed their intention to continue with annual audits regardless of mandatory requirements.
Our submission on three-year audit cycle for SMSFs
Read the full policy submission made to TreasuryRead more