SMSF Auditor Registration : Options for accountants
SMSF Auditor Registration : Regulatory requirements
On 23 June 2012 the Government announced the long awaited details and regulations in relation to the planned SMSF Auditor Registration regime. The key points are:
- Registration will be handled by ASIC and will commence on 31 January 2013
- Registration of SMSF Auditors is mandatory by 1 July 2013 (ie you will not be able to undertake SMSF audits beyond this date unless you are registered)
- SMSF Auditors applying for registration will be required to satisfy the following criteria
- hold a tertiary accounting qualification which includes an audit component or have completed audit studies as part of their professional qualifications
- meet a fit and proper person test
- hold appropriate professional indemnity insurance
- have at least 300 hours of SMSF audit experience in the three years prior to registration
- pass a competency exam (exam to be available from 1 July 2013 with those required to sit the exam having 12 months to successfully complete the exam to become fully registered)
- Transitional arrangements will be available to existing SMSF auditors. SMSF auditors who have signed off 20 or more SMSF audits in the 12 month period prior to registration will not be required to sit the competency exam. In addition, any SMSF Auditor who has signed off at least one SMSF audit in the prior 12 months will be exempted from the 300 hours experience requirement.
- SMSF Auditors will be required to comply with APES 110 “Code of Ethics for Professional Accountants” as part of their registration. This requires 120 hours of CPD every three years
- An initial registration fee of $100 and annual renewal fee of $50 will apply. There will be a $100 fee to sit the competency exam
- Fields for Registered SMSF Auditor number already exist in the SMSF annual return and ATO eSAT Auditor Contravention system.
SMSF Auditor Registration : Implications for Small to Medium Accounting firms
SMSF Auditor registration will force many small to medium sized accounting practices make strategic decisions regarding whether they offer SMSF Audits as a service and how they arrange SMSF Audits for their SMSF accounting and tax clients. For many smaller accounting firms the decision is obvious : we will focus on our existing clients and concentrate on providing higher value SMSF administration, accounting, strategic advice and tax returns.
Providing SMSF audits, particularly given the additional compliance requirements, will not be attractive for firms undertaking small numbers of SMSF audits (say less than 50 funds per annum) when the costs and time requirements associated with compliance, insurance, training, initial and ongoing registration and renewal, additional software and tools are taken into account.
This is exactly the Regulators intention – they will then focus on the ongoing education and compliance of a smaller group of specialised registered SMSF Auditors. It is therefore likely the number of SMSF Auditors will decline in the coming years with fewer practitioners each undertaking greater numbers of SMSF Audits.
Small to medium sized firms need to consider how they will arrange audits for their existing SMSF clients. Potential solutions including “swapping” audits with another firm – “I audit all your SMSF clients and you audit all my SMSF clients”. However; you still need to satisfy the SMSF Auditor registration requirements and will incur all the associated costs. Furthermore; many would question whether this form of arrangement satisfies the independence requirement and whether it is the best use of your time.
Outsourcing your SMSF Audits : Checklist of items to consider
Accordingly; many firms will look to refer their SMSF Audit work to external specialist firms. Set out below are some of the issues you should consider when selecting an external independent SMSF Auditor:
- Will they provide a responsive service? Or will you represent a minor portion of their total workload?
- How approachable/compatible will they be? Can you easily speak to the principal?
- Do they have systems & tools which will reduce the burden on your existing practice? Or will you need to schedule time for them in your office?
- Are you dealing with specialists who are committed to this service? Or is this a service delegated to junior staff which will get pushed aside when pressure arises due to lodgement timelines?
- Are their fees market competitive and reasonable? Are their fees predictable/known in advance or will you spend time agreeing fees in relation to each and every engagement?
Longer term implications
Hopefully you find the thoughts above useful. In the longer term I believe this is a positive step for both the accounting profession and for the development of a more professional and robust SMSF market. In summary I expect that in the long term we will see:
- Fewer SMSF Auditors – but those who remain will undertake significantly larger numbers of SMSF audits
- More sophisticated and professional SMSF Audit services – supported by more sophisticated tools and systems designed to streamline the interaction between the SMSF Auditor and accounting firms. This investment can only be justified by specialist firms handling reasonable volume of funds
- Quality of service and responsiveness will become increasingly important – accounting firms will increasingly value superior service over slightly lower fees