COMPLIANCE
A potential auditor independence solution
The amended APES 110 independence standard threatens to wipe out SMSF audit revenues for many accounting practices. Kevin Bungard looks at how exchange programs may help, and outlines the strict requirements they must meet, in allowing firms to retain their SMSF audit businesses.
KEVIN BUNGARD is Australian general manager at MyWorkpapers
44 selfmanagedsuper
The APES 110 Independence Guide, released by the APESB in May 2020, has had huge implications for SMSF auditors and industry estimates are that 200,000 to 300,000 funds may be affected. MyWorkpapers surveyed its client base in September 2020 and the results showed just over 60 per cent of accounting practices are impacted by the prohibition on ‘in-house’ auditing of SMSFs. The survey also showed that, on average, in-house audits made up just under 80 per cent of audits for the firms conducting them. If these percentages are reflected across the entire industry, then 290,000 SMSFs will need to put in place a new audit arrangement effective from 1 July 2021. Under the new standard, firms must outsource the audit of SMSFs they administer, and many firms have been looking for a way to avoid cutting staff
that would be made redundant by this measure and get a return on the investment put into building that part of their business. After exploring the use of exemptions, business restructuring and the possibility of spinning out or selling their audit divisions, many firms remain deeply frustrated with the options available. One option firms have explored is pooling or exchanging audits among a group of practices. Before exploring the dos and don’ts of how audits might be ‘exchanged’ between firms, let’s quickly cover off some of the other options firms may have considered and rejected.
Exemptions and restructuring do not work Much has been written about the routine and mechanical exemption. Many firms had hoped there was a way to split responsibilities within the
