The Spotlight on SMSF Auditors

Monday, 14th November 2011

Webinar:

Housekeeping

• Attendees are muted for the session• Presentation slides available in

Training Materials page• Refer to registration link

• You can type questions to the presenter(s) from your screen

• Webinar recording will be available through The SMSF Academy website after the session

Housekeeping

• The growing problem of ECT

In today’s session…

• The current state of play

• Cooper’s spotlight on auditors• Stronger Super – the industry

speaks• Auditors + Independence = APES 110• Auditor registration, are you ready?• The Decision Process moving forward• A bit about ENGAGE!

Today’s Session

Guest Panellist

Jo Heighway, ENGAGE Super Audits

ENGAGE Super Audits is an online provider of independent SMSF audit services Australia-wide. Jo is the founder and CEO, and is trusted by many of the best administrators as their audit provider. Jo is a Chartered Accountant, SSATM and SSAud®, and has been auditing SMSFs since beginning her career in the super audit division of Deloitte back in 1995 at the ripe old age of 17. Jo’s passion for the SMSF audit industry saw her recently named Telstra NSW Young Business Woman of the Year.

Guest Panelist

Interactive Poll #1

Question:How many audits do you or your business currently complete each year?

Interactive Poll #1

The Spotlight on SMSF Auditors

“The work of approved auditors is fundamental to the health of the SMSF market.

Approved auditors play an important role on behalf of the community.

So naturally we're keen to support an increasingly competent auditing profession”.

Stuart Forsyth, Assistant Commissioner Superannuation

There is a small window of opportunity before auditor registration takes effect. Now is the time to plan and take action.

The following professional requirements apply NOW and will CONTINUE to apply:

• Approved Auditor

• Competency Requirements for Auditors of SMSF’s

• Australian Auditing Standards

• APES110

• Revised GS009 is now available, guidance statement issued by AuASB on Auditing SMSFs

• ICAA Independence Guide for SMSF Auditors (updated version expected)

The Current State of Play

The ATO’s 2011-12 compliance program for approved auditors incorporates 3,900 planned activities! Targets include:• High-risk auditors (not identifying significant

contraventions)• Serious breaches of independence requirements• Limited or no evidence of an audit being maintained by

auditors (300 cases) • Low-volume auditors• Low cost auditors• Auditors who fail to satisfy their personal tax obligations• Field reviews of internal controls of practices that perform

over 300 SMSF audits annually * Planning opportunity – in or out?

The Current State of Play

Housekeeping

Cooper Review Statistics on SMSF Auditors

• 11,500 approved auditors undertaking SMSF audits

• Auditors on average completed 35 audits each

• 51% of auditors completed less than 5 audits (3% of total funds)

• Only 2% of auditors conducted more than 250 audits

• 4.3% of audits done by auditors who weren’t members of the 3 professional accounting bodies

• Audit fees decline based on scale (number of audits) and specialisation * planning opportunity

The Cooper Review’s Spotlight on Auditors

“The SMSF regulatory framework is heavily reliant on approved auditors, however the approved auditor population has no minimum, consistently policed, competency and independence standards”.

The proposed solution:

• Registration of approved auditors (with ASIC)

• ATO to police the approved auditor standards

• Linking registration requirements to ongoing minimum competency and independence standards .

The Cooper Review’s Spotlight on Auditors

• Main points of contention:- competency exams- mandatory outsourcing

• IndependenceFollowing industry consultation, there will be no “mandatory outsourcing”. Instead APES 110 will be a legislative requirement for all SMSF auditors as part of their ASIC registration.

• Auditor RegistrationAuditors WILL be registered with ASIC.Announcement from Government expected any day (?!) on this.

Stronger Super – Industry Consultation

• APES 110 is the current standard for independence for SMSF audit engagements

• Independence comprises of both independence of mind and independence of appearance.

QUESTION: would your client consider your current arrangement is “independent”?

Auditors + Independence = APES 110

EXAMPLES - When independence is or is likely to be impaired:• Auditing your own fund• Auditing the SMSF of a relative• Auditing the SMSF of a partner within your own firm• Auditing an SMSF where your firm provides financial planning

advice to the SMSF• Auditing the SMSF where you have prepared the books• Having at least 2 partners in a firm sign off each other’s work,

where there are not appropriate safeguards in place such as totally separate accounting and audit

reporting lines and teams

Auditors + Independence = APES 110

When independence is or is likely to be impaired (cont’d):• Two firms swapping clients to conduct audits – factors such as

relying on each other for revenue, a need to ensure an ongoing relationship, pressure for unqualified audit opinions or other factors may result in independence being impaired

• Outsourcing arrangements where a significant portion of the auditor’s fees come from the one referral source

• Auditing the SMSF of a significant client of the firm• Auditing an SMSF where the firm has invested the Trustee’s money

in entities related to the firm* Planning Opportunity – proactive Rectification, or Specialise to meet demand

Auditors + Independence = APES 110

If in doubt, outsource.

“Ultimately, if independence cannot be assured, then the audit engagement must be declined. This principle applies regardless of the cost to the firm, how simple the SMSF might be, how much your client

might object, or even when you know for a fact that the SMSF has complied with all its obligations”.

Liz Westover, Head of Superannuation ICAA

Auditors + Independence = APES 110

There WILL be a competency exam as well as experience requirements, police checks etc. New auditors (entering the profession after 1 July 2012) – experience component + competency test Existing auditors – transitional arrangements will apply (to qualify must have completed a minimum number of audits within the 12mths prior to 1 July 2012). * Planning Opportunity!Annual renewal will require ongoing experience and confirmation of independence.

Auditor Registration…are you ready?

The Opportunities• Are you In?

– Plan to qualify as an existing auditor– Specialise to benefit from the demand for

outsourcing

• On the fence?– Much clearer independence guidelines from the

professional bodies

• Are you Out?– Pro-active rectification– Act quick to secure an independent auditor before

demand spikes

The Decision Process moving forward…..

What does it all mean for you?It is projected that there will be a 50% reduction in SMSF auditors solely due to the requirement to register with ASIC.

The Threats• ASIC registration – meeting entry requirements• Increased ATO policing activity• ASIC powers (yet to be announced)• Expect A LOT more scrutiny from the professional

bodies - CPD reviews, quality control reviews, and targeted education

• Costs of registration – initial and ongoing• High demand for outsourcing• Small firms less likely to comply with APES110• Succession Planning – are we heading for a repeat

of the registered company auditor crisis?

The Decision Process moving forward…..

What does it all mean for you?

Interactive Poll #2

Question:As a result of these Stronger Super reforms, what is going to have the greatest impact on your business?

Interactive Poll #2

Let’s Talk about the “F” Word

The Decision Process moving forward…..

What does it all mean for you?

……Fees!

The #1 concern for accountants considering outsourcing is Loss of Gross Fee Revenue

So will audit fees rise or fall??

“It is now up to the SMSF audit profession to ensure it meets it’s obligations for independence with integrity and professionalism.The Government has supported the existing code of ethics by determining that it should be adhered to by all SMSF auditors. The profession must now prove that this was the right decision”.

Liz Westover, head of superannuation ICAA

The Challenge is on!

• Online SMSF Audit Service available Australia-wide• Audits performed by local, supervised, qualified audit specialists• Well established company with a reputation for high quality,

reliability, superior turnaround and support• The leaders in SMSF audit technology

Just call 1300 AUDITS, it’s that easy!

ENGAGE Super Audits

www.superfundauditors.com.au http://www.theauditorsblog.com.au/

• Members – Free*• Non Members - $77 (inc. GST)• SPAA & FPA points to be issued for attendees

(where requested)* Refer to member resource library for further details

What we will be covering in the webinar:• Important considerations when structuring a

pension• Impact of TR 2011/D3 – when a pension

commences and ceases• Segregation and Exempt Current Pension

Income (ECPI) issues• Case studies to demonstrate strategies and

highlight issues• Tips, and traps when establishing and

running pensionsSpecial Offer (Promo code – TSAAUDIT):Non-Members - register for next webinar for just $55 (inc. GST), that’s a 29% saving on standard rate

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Thank You

www.engagesuper.com.au

T: 1300 AUDITSE: info@engagesuper.com.au

http://www.theauditorsblog.com.au

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