ASIC acts against 19 SMSF auditors

To help protect the integrity of self-managed superannuation fund (SMSF) audits, ASIC has taken action against 19 SMSF auditors since 1 July 2021.

ASIC deregistered 12 SMSF auditors and imposed additional conditions on the registration of seven others. For seven of those deregistered, ASIC chose to accept voluntary cancellations as negotiated outcomes.

The 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.

Thirteen of these SMSF auditors had breaches identified and referred to ASIC by the Australian Taxation Office (ATO). The other six had issues identified directly by ASIC.

ASIC Commissioner Sean Hughes said, ‘SMSF auditors play a fundamental role in promoting confidence and instilling trust in the SMSF sector, so it is crucial that they adhere to ethical and auditing standards. ASIC will continue to take action where the conduct of SMSF auditors is inadequate and fails to meet the requisite standards.’

These actions are in addition to the 18 SMSF auditors who ASIC acted against because of their involvement in reciprocal audit arrangements (refer: 22-042MR).

Deregistered SMSF auditors

Disqualifications

Christopher Baldwin, of Shepparton, Victoria, was disqualified from being an SMSF auditor in October 2021 for:

• significant breaches of auditor independence requirements. He audited the funds of family members. He shared common financial interests with one of the funds. He also audited a fund that lent money to a company of which he was a director. Mr Baldwin’s firm also prepared financial statements that he subsequently audited;
• not obtaining sufficient appropriate audit evidence and not adequately documenting his audits in relation to ownership and market value of assets, arm’s length rental properties, loan arrangements and the requirement for trustees to have signed financial statements. Mr Baldwin also did not obtain signed financial statements or trustee declarations; and
• not reporting a breach as required. Mr Baldwin identified and concluded in his audit of a fund that money had inappropriately been withdrawn from a bank account. He did not qualify his auditor’s report or lodge an auditor’s contravention report to the ATO as required.

Adnan Sibai, of Sydney, New South Wales, was disqualified from being an SMSF auditor in October 2021 for:

• not obtaining sufficient appropriate audit evidence about fund structure (whether each director of a fund’s corporate trustee was also a member of the fund), ownership of assets; dividend and trust distributions, the relevance and reliability of internet bank statements and automatic bank feeds and the requirement for trustees to have signed financial statements. He also did not adequately consider the relevance or reliability of other evidence he did obtain; and
• not otherwise being a fit and proper person to be an SMSF auditor because and for the reasons that he had been disqualified by the ATO from being a responsible officer of a corporate trustee of a superannuation fund, and disqualified by the Tax Practitioners Board (TPB) from being a tax agent and also because he did not declare his disqualification by the TPB to ASIC in his relevant SMSF auditor annual statement. Mr Sibai also failed to lodge four SMSF auditor annual statements.

ASIC-initiated cancellations

Yuk Wong, of Gladesville, New South Wales, had his registration cancelled in August 2021 for not meeting the following additional conditions imposed previously on his registration (refer: 20-215MR):

• to provide evidence of compliance with continuing professional development requirements; and
• to review and revise tools and templates used to perform and document SMSF audits.

John Campbell, of Kerang, Victoria, and Christopher Sheppard, of South Yarra, Victoria had their registrations cancelled in September 2021 and December 2021 respectively, for not maintaining the practical experience necessary for carrying out SMSF audits. They had not performed any significant SMSF audit work during a continuous period of more than five years.

Voluntary cancellations

ASIC accepted requests from seven SMSF auditors to cancel their registrations as negotiated outcomes of their individual investigations about various breaches, or for fitness and propriety concerns, including:

• having signed company auditor reports when not a registered company auditor or having allowed this to occur;
• actions taken against the auditor, as a tax agent, by the TPB;
• auditing fund accounts prepared by the auditor’s firm;
• auditing a sibling’s SMSF;
• not obtaining sufficient appropriate audit evidence about fund structure, limited recourse borrowing arrangements, investment strategy requirements, ownership of assets, valuation of assets, sole-purpose tests, in-house asset requirements, arm’s length requirements, and the requirement for trustees to have signed financial statements; and
• auditors’ minimum continuing professional development requirements.

Conditions imposed on SMSF auditor registration

Brian Taylor, of Sydney, New South Wales, had additional conditions imposed on his registration in October 2021 for not obtaining sufficient appropriate audit evidence or not adequately evaluating it, including recording fund assets at market value, the existence of a related party loan, and the requirement for trustees to have signed financial statements. The requirements of the conditions are to:

• undertake a course on conducting SMSF audits;
• review audit documentation policies and procedures;
• have three SMSF audit files reviewed by an independent SMSF auditor;
• provide notification of the additional conditions to their professional accounting association; and
• pass ASIC’s SMSF auditor competency exam.

Ashwin Panchal, of Lansdale, Western Australia, had additional conditions imposed on his registration in October 2021 for not obtaining sufficient appropriate audit evidence, including about ownership of property, storage and market value of collectible asset and compliance with in-house asset provisions. The requirements of the conditions are to:

• undertake a course on conducting SMSF audits;
• have three SMSF audit files reviewed by an independent SMSF auditor;
• limit the number of SMSF audit reports that the auditor can issue;
• provide notification of the additional conditions to their professional accounting association; and
• pass ASIC’s SMSF auditor competency exam.

Brian Carroll, of Miranda, New South Wales, had additional conditions imposed on his registration in November 2021 for: breaching auditor independence requirements (auditing a sibling’s fund and a significant number of his sibling’s clients); not obtaining sufficient appropriate audit evidence or not adequately evaluating it, including about whether fund assets were recorded at their market value, leases being at arm’s length and the requirement for trustees to have signed financial statements; and not meeting audit file and documentation requirements. The requirements of the conditions are to:

• undertake a course on conducting SMSF audits and SMSF auditor independence;
• conduct an independence threat review for all SMSF audit clients.
• not perform audit of any SMSF where the fund is a client for bookkeeping, accounting or tax services;
• review and revise SMSF audit tools and templates;
• have five SMSF audit files reviewed by an independent SMSF auditor;
• provide notification of the additional conditions to their professional accounting association; and
• pass ASIC’s SMSF auditor competency exam.

Ahmed Afifi, of Darlinghurst, New South Wales, had additional conditions imposed on his registration in December 2021 for: not obtaining sufficient appropriate audit evidence or not adequately evaluating it, including about whether fund assets were recorded at their market value, the storage and market value of artwork, incorrect payments of insurance premiums; not having agreed the terms of his audit engagements with clients; not having an audit strategy, plan or current audit program; and because of pending matters. The requirements of the conditions are to:

• notify ASIC about any changes to the pending matters and their eventual outcomes;
• review SMSF audit tools, templates and methodology and review of three SMSF audit files by an independent SMSF auditor;
• undertake a course on conducting SMSF audits;
• provide notification of the additional conditions to their professional accounting association; and
• pass ASIC SMSF auditor competency exam.

Sebastian Buccheri, of Carlton, Victoria, had additional conditions imposed on his registration in February 2022 for: not obtaining sufficient appropriate audit evidence or not adequately evaluating it, including about whether fund assets were recorded at their market value, compliance with arms’ length and in-house asset rules, and the requirement for trustees to have signed financial statements; and for not having adequate audit documentation. The requirements of the conditions are to:

• have three SMSF audit files reviewed by an independent SMSF auditor;
• undertake a course on conducting SMSF audits;
• have SMSF audit training provided externally to all employees who perform SMSF audit engagements;
• establish, review and revise SMSF audit policies and procedures regarding acceptance and continuance of SMSF audit engagements, addressing overall SMSF audit client volume and capability to complete to standard and retention of clients who fail to provide documentation as and when required; and
• provide notification of the additional conditions to their professional accounting association.

Bernie Trounce, of Noble Park, Victoria, had additional conditions imposed on his registration in February 2022 for: not obtaining sufficient appropriate audit evidence, including about whether fund assets were recorded at their market value, compliance with arms’ length and in-house asset rules; and inadequate audit planning, execution and reporting. The requirements of the conditions are to:

• have three SMSF audit files reviewed by an independent SMSF auditor;
• undertake a course on conducting SMSF audits; and
• notify professional body of additional conditions.

Neil Yeoman, of Southbank, Victoria, had additional conditions imposed on his registration in February 2022 for not obtaining sufficient appropriate audit evidence or not adequately documenting consideration of evidence, including about whether fund assets were recorded at their market value, ownership of assets, and compliance with arms’ length requirements. The requirements of the conditions are to:

• have three SMSF audit files reviewed by an independent SMSF auditor;
• undertake a course on conducting SMSF audits; and
• notify professional body of additional conditions.

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 addition 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 cancel the registration of an SMSF auditor for certain administrative reasons specified in section 128E. SMSF auditors whose registration has been cancelled may reapply for registration in the future. ASIC may also impose conditions on an SMSF auditor’s registration under section 128D of the SIS Act.

ASIC monitors compliance with the additional conditions it imposes 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, 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.