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SMSF Auditor Number Fraud

Further SAN mis-use reported to TPB



A further 90 tax practitioners have either deliberately or mistakenly mis-used an SMSF auditor number, with the ATO detecting over a thousand instances of potential fraud. Criminal prosecution has begun against one tax agent.


The ATO noted 74 tax agents, representing 106 funds, had failed to respond to a follow-up request in December 2019 and will now be referred to the TPB, along with 15 tax agents who had already been referred to the TPB in 2019/20 after the ATO found 154 funds deliberately misreported an auditor’s SAN.


“Some practitioners have fraudulently charged clients for audits that didn’t occur and some have even prepared false audit reports with forged auditor signatures,” a recent ATO report said.


“We’ve also referred tax agents for prosecution action in more serious cases of deliberate SAN misuse, including where agents have retained audit fees without arranging an SMSF audit or have forged auditors’ signatures on the audit report. So far, criminal prosecution action has begun against one tax agent,” it said.


The SMSF audit community has long been concerned at gaps in the system which mean there is no efficient reconciliation between actual audits undertaken by an auditor and SMSF tax returns using the same auditor number.


Misrepresentation

In effect, mis-use of a SMSF auditor number (SAN) amounts to the auditor's identity / authority being misrepresented by the tax practitioner, with both the ATO and Trustees lured into believing an SMSF is compliant and protected when in fact no valid audit has been undertaken. Surely in this digital era, the profession of SMSF auditing should not fall prey to catfish-like false portrayal of identity.


The ATO’s recent campaign on intentional and inadvertent mis-use of auditor numbers has revealed 1445 instances of potential SAN misuse. These figures come from 420 auditors who reported mis-use after an ATO mail-out to 5,446 SMSF auditors, meaning that nearly 8% identified misuse of their auditor numbers.


We might safely assume that not every auditor included in the mail-out invested the time required to cross-check the ATO list against their own audit lists, so we suspect this may only be the tip of the iceberg.


Need for a better system

Although the current manual reconciliation process is inefficient and needs improvement, it is better than the previous situation where an auditor remained unaware of how and when their SAN had been used.


Surely in a post-Royal Commission environment, greater care, accuracy and honesty is required across the industry. Systematically, the potential for auditor numbers to be used without the authority of the auditor must be stopped.Quality, independent audits are a cornerstone of a sustainable SMSF industry.


Respect for audits

Importantly, compliance needs to be seen -notas a burden / cost centre - but rather in playing a valuable role in protecting retirement savings and also protecting the brand reputation of Accounting firms. At SaulSMSF, we want to work with people who hold their clients' best interests at heart and who respect the value-add of the audit process.

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