ASIC acts against eight SMSF auditors

ASIC has acted against eight self-managed superannuation fund (SMSF) auditors over the period 1 March 2022 to 30 June 2022.

ASIC deregistered five SMSF auditors and imposed additional conditions on the registration of three others. Seven of these SMSF auditors were referred to ASIC by the Australian Taxation Office (ATO). The remaining auditor had issues identified by ASIC.

These actions resulted from breaches of obligations including auditing and assurance standards, independence requirements, and registration conditions, or because ASIC was satisfied the individual was not a fit and proper person to remain registered.

ASIC Commissioner Sean Hughes said, ‘ASIC expects SMSF auditors to adhere to the ethical and auditing standards given the fundamental role they play in promoting confidence in the SMSF sector. ASIC will continue to take action where the conduct of SMSF auditors is inadequate. These actions help protect the integrity of SMSF audits.’

These actions are in addition to the 10 SMSF auditors that ASIC acted against because of their failure to lodge annual statements (refer 22-121MR).

Deregistered SMSF auditors

Disqualifications

Ross Casperson, of Bundall, Queensland, was disqualified from being an SMSF auditor in April 2022 for not meeting the following additional conditions imposed on his registration (refer 19-189MR):

• to have five SMSF audits peer reviewed; and
• to respond to written requests for information within the time specified.

Ian Good, of Glen Waverley, Victoria, was disqualified from being an SMSF auditor in April 2022 for not being a fit and proper person because he did not provide audit files as requested and otherwise acted inappropriately in relation to the ATO’s attempts to review his audit work.

Clifton Hammond, of Mirboo North, Victoria, was disqualified from being an SMSF auditor in March 2022 for:

• failing to maintain his auditor independence because he audited his own SMSF; and
• failing to lodge with ASIC an approved SMSF auditor annual statement.

John Pascoe, of Nedlands, Western Australia, was disqualified from being an SMSF auditor in March 2022 for:

• not obtaining sufficient appropriate audit evidence; and
• not adequately documenting his audits in significant areas across three funds.

Specifically, this was in relation to the existence, repayment and arms-length nature of a loan; ownership and market value of fund assets; ownership of a collectable asset; the level of carried forward tax losses; and the appropriate accounting recognition for management fees.

Phil Scahill, of Parramatta, New South Wales, was disqualified from being an SMSF auditor in March 2022 for:

• failing to lodge with ASIC an approved SMSF auditor annual statement; and
• otherwise not being a fit and proper person to be an SMSF auditor.

Conditions imposed on SMSF auditor registration

Andrew Hunt, of Parramatta, New South Wales, had additional conditions imposed on his registration in May 2022 for:

• breaching auditor independence requirements by auditing an SMSF for which he prepared the financial statements; and
• breaching Australian auditing and assurance standards by: not obtaining sufficient appropriate audit evidence in relation to a number of fund investments in property, shares and a related trust and an advance payment classified as a sundry creditor; by not adequately evaluating and documenting the competence, capabilities and objectivity of management’s expert and whether evidence from management’s expert was appropriate and reliable; and issuing engagement letters that did not reflect changes to the reporting requirements relevant to the income year audited.

The requirements of the conditions are to:

• undertake a course of study on conducting SMSF audits
• have six SMSF audit files reviewed by an independent SMSF auditor
• conduct a review of his practices and his firm, to ensure compliance with independence requirements
• review and revise SMSF audit tools and templates
• pass ASIC’s SMSF auditor competency exam; and
• provide notification of the additional conditions to his professional accounting association.

Terence Murphy, of Forster, New South Wales, had additional conditions imposed on his registration in April 2022 for not obtaining sufficient appropriate audit evidence, including about: market value of properties; and compliance with limited recourse borrowing arrangement, in-house asset, related party and arm’s length provisions.

The requirements of the conditions are to:

• not perform the audit of any SMSF where it is also a client for the preparation of accounts or financial statements;
• engage an independent SMSF auditor to review his SMSF audit tools, template and methodology and review three SMSF audit files;
• pass ASIC’s SMSF auditor competency exam;
• successfully complete a course on conducting SMSF audits; and
• provide notification of the additional conditions to his professional accounting association.

John Phillips, of Melbourne, Victoria, had additional conditions imposed on his registration in April 2022 for:

• breaching auditor independence requirements where he audited an SMSF for which his staff prepared the financial statements for; and
• not obtaining sufficient appropriate audit evidence to support the market value of a number of properties held by a fund or the storage and existence of collectables of another fund.

The requirements of the conditions are to:

• undertake a course of study on conducting SMSF audits;
• have three SMSF audit files reviewed by an independent SMSF auditor; and
• provide notification of the additional conditions to his professional accounting association.

Background

Approved SMSF auditors are registered with ASIC under the Superannuation Industry (Supervision) Act 1993 (SIS Act).

ASIC and the ATO work closely together as co-regulators of SMSF auditors. The ATO monitors SMSF auditor conduct and may refer matters to ASIC, which may decide to disqualify, suspend, cancel or impose additional conditions on registrations.

ASIC may make an order disqualifying or suspending a person from being an approved SMSF auditor, under section 130F of the SIS Act, if the person has failed to carry out or perform adequately and properly the duties and functions of an auditor, or is not a fit and proper person to be an approved SMSF auditor. A disqualified SMSF auditor is not eligible to reapply for registration.

ASIC may impose conditions on an SMSF auditor’s registration under section 128D of the SIS Act.

ASIC monitors compliance with conditions imposed on SMSF auditor registrations and where appropriate, will take further action if they are not met, such as cancellation or disqualification.

SMSF auditors have the right to appeal decisions ASIC makes in relation to them under the SIS Act. They may request that ASIC reconsider a decision it has made against them. If the decision is confirmed or varied the SMSF auditor may apply to the Administrative Appeals Tribunal for further review of the decision.

Further information can be found on ASIC’s website and in Regulatory Guide 243 Registration of self-managed superannuation fund auditors.

SMSF trustees and members can check whether their auditor is registered, suspended or has conditions imposed on their registration by searching ASIC’s SMSF Auditor register.

Disqualified auditors are placed on ASIC’s public banned and disqualified register at connectonline.asic.gov.au.