The US election has focussed the world on the importance of accuracy, transparency, independence and the rule of law in tallying ballots. This reminds me of the circuitous journey we have been on with SMSF auditing in Australia. The idea of an independent SMSF audit was established for the benefit of trustees... to protect their retirement savings and to provide a level of oversight and accountability to compensate for the governance that otherwise would be gained from the infrastructure of a retail or industry fund. Professional oversight benefits Trustees, Accountants and Financial Advisors as much as it does the ATO, as it upholds an SMSF industry that is properly managed and can be trusted. Rules are there to be respected The problem with many rules is that boundary slippage creeps in overtime. This occurred in SMSF auditing with the introduction of Chinese Walls and reciprocal arrangements so that firms could get around the "independence" hurdle to retain audit fees in addition to accounting and administration fees. In effect, some firms placed greater importance on controlling the flow of fees and work between professionals than on the intended purpose of proper governance for SMSFs. Every SMSF counts Just like "every vote counts" in the US election, so does the integrity of every SMSF in the Australian SMSF industry. Each and every healthy, compliant SMSF accumulates into a healthy, well governed SMSF industry as a whole. Good intentions do not trump good execution While most professionals are honest and have good Intentions for the health of their clients' SMSF portfolios, there has been some lack of clarity around the appointment of independent auditors. Securing fees in an ever-challenging economic environment has sometimes caused the original purpose of a truly independent audit to become subordinate to other objectives. The temptation to retain audit fees for an associate has seen a proliferation of rationales for bending the independence rules. This is all well and good until something goes wrong with a fund. The impact of Court rulings Certainly when a mismanaged fund ends up in Court, rulings have upheld that Auditors play a crucial role in protecting Trustee savings. This in turn protects the reputations of all the professionals involved in the SMSF fund. Understanding the value of independent audits Smart operators in the SMSF industry have long embraced the value of a reputable, independent auditor. Now the new Code and Independence Standards will reinforce the essential role SMSF auditors have in protecting the retirement savings of trustees and maintaining the integrity of the sector.
Chartered Accountants Reporting and Assurance Leader Amir Ghandar said recently: “Independence is essentially so that the [SMSF community’s] stakeholders and, of course, first and foremost the SMSF trustees have confidence they’re being served objectively and that [the audit is] a true line of defence beyond other advisers that are involved.”
“From the perspective of an accountant working on the administration side, the independent audit does provide us with a level of integrity and rigour to the process.”
“[Audits] are the last line of defence or the ultimate line of defence when it comes to [trustees] having integrity around their retirement savings. The stakes can’t be higher than that,” he added. Embracing professionalism and integrity Just as the US election reminds us of the value of due process, so we too are reminded of the value of an independent audit process. After all the real purpose of the audit is to protect trustees’ retirement savings and to protect the integrity of the sector. Let's stop seeing audits as a "grudge purchase" and rather embrace the value of the great role that auditors play for SMSFs, their trustees and all professionals associated with the SMSF industry.
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