“The auditing standards don’t specifically address that issue but the ATO and ASIC’s preliminary view is that there is a potential independence issue there,” Ms Macfarlane told SMSF Adviser.

“There are some potential issues around familiarity and potential threats that perhaps may not be able to be mitigated against. We are progressing some further work in this space.”

As part of the ATO’s wider focus on auditor independence and quality, it will also be monitoring situations where two partner firms audit the funds of each other’s clients.

“There are other circumstances where the audit function and the accounting function are under the one roof, but of course there can be processes and controls put in place in those instances to mitigate against independence risks,” Ms Macfarlane said.

“So we will be looking at that closely and trying to understand the controls they have in place and the extent to which those risks have been mitigated.”

Ms Macfarlane said the ATO will continue to pay close attention to situations where a practitioner is both the SMSF auditor and tax agent for the fund.

“Now of course SMSF auditors can also be registered tax agents, but our concern was that, in that case, the SMSF auditor was also the tax agent [and] they may have also been involved in the preparation of the financial accounts and the reporting for the SMSF,” she said.

The ATO is still seeing a small number of cases like this.

“We will be continuing to engage with those auditors and following up on that to address those particular risks,” Ms Macfarlane said.

“Historically, our audit independence work has focused very heavily on clear fundamental breaches of auditor independence. For example, an SMSF auditor auditing their own SMSF or those of family members. Since we’ve had a focus on that, instances of that have dropped significantly so this year we will be focusing on some other areas of potential independence.”