Updated: Aug 26, 2020
There have been mixed reactions to the new Independence Code for SMSF audits, with some firms outraged that they may have to give up audit fees and repurpose staff, while others are a step ahead in anticipating the inevitable "drawing of boundary lines" around independence in audit arrangements. Whatever your personal view, now is not the time for your firm's audit arrangements to remain the proverbial 'elephant in the room' but to be brought out into the open and discussed intelligently. The question is, how would your firm's audit arrangements withstand scrutiny under the new Code? Independent audits are now mandatory The ATO has announced that genuine SMSF audit independence is now mandatory for all firms - large and small - and will be enforced. ATO SMSF Auditor Portfolio Director, Kellie Grant said, "Auditors will have this financial year to get on top of this new standard and look at their particular engagements and look where they need to restructure [in order to comply with the new requirement].” How and when to transition? With the grace period short, accounting firms are well advised to start talking openly about how their audit arrangements may be seen under the new Code and to begin to trial out new audit processes / auditors and transition to new arrangements to ensure they are not in breach of the new Code. Some considerations may be:
What is the value of audit fees at stake? While it's not worth potentially creating a compliance issue for the sake of keeping fees, what other alternatives are available? Could the audit portfolio be sold?
How do you find an auditor you can trust and rely on to work with you both through the transition and also through individual complex compliance issues?
Would a new auditor place a staff member on secondment to learn your internal processes and ease the transition? Would a new auditor take on one of your employees to create a win-win outcome whereby client knowledge is retained, resources are reallocated and with proper independence ensured?
What other win-win outcomes could there be?
The benefits of independence
While change is hard, there are benefits in embracing genuine independence. Impartial advice and professional judgement protects your firm, your clients and your reputation. It helps you to make the right decisions, which delivers the best outcomes for your clients, for your brand and for your practice.
If your firm needs to reconsider audit arrangements in light of the new Code, we'd be happy to talk with you about how we can customise an audit solution to synchronise with your firm's internal processes, retain human resource equity and deliver quality outcomes for your clients and for your firm.
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