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ATO reports on cheap audits swoop
Following its review into the low-cost SMSF audit space last year, the ATO says it has identified a number of examples where low-cost audits failed to meet basic standards.
ATO Commissioner Chris Jordan says following its investigation into lower-cost audits, which it defines as audits that charge less than $400, the tax office identified several problems with these audits.
“No great surprise, we have found cases of concern where they’ve failed to conduct any sort of adequate audit that complies with any of the standards,” Mr Jordan told the SMSF Association’s national conference in Melbourne.
“They had no written audit plan or representation letters from trustees, all the things you would expect to be done, and we have taken action there.”
Mr Jordan said around 9 per cent of SMSFs are audited by low-cost auditors. Out of the 6,000 active SMSF auditors, some 8 per cent are low-cost auditors.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
the audit should be done by the ATO. Total conflict of interests for the trustee to hire his own auditor AND PAY for it. Imagine what would happen if you applied the SMSF rules and costs to Income Tax. Thered be a revolution and rightly so. Super is very badly run by the government and we pay the costs of inefficiency0- i find it outrageous that the ATO think they can tell auditors how to fulfil their responsibilities . Chartered Accountants are the only accounting professionals that have the training and experience to do these audits . Professional judgement is the key to SMSF audits and only Chartered Accountants have the necessary professional judgement . It is highly unlikely ATO employees have professional experience or knowledge and accordingly their views should not be considered
AS a Fellow of The Institute of Chartered Accountant I can do most audits within 20 to 30 minutes . I advertise the cost at $ 440 but most audits are billed at $ 180 to $ 200 per year . I do about 3000 audits a year and I have a great lifestyle business , I work 6 hours a day 4 days a week from home with no staff and get to ride and play basketball other times , You need no tax experience only a good understanding of financial accounting which as a Chartered Accountant I have . The ATO has no idea about audit quality and should not be inferring with Chartered Accountants and my business model
The ATO has not reviewed any of the funds I have audited and the quality assurance principles of the Institute are only mildly applicable to SMSF audits . Audit standards require applicable of professional judgement rather than a process
0- Be careful when you say only Chartered Accountants have the training and experience and possess professional judgement to perform these audits. Certified Practising Accountants are also highly qualified by training and experience to perform audits. And if the CPA also happens to be licenced or has Authorised Representation of a Licenced Financial Planner, then he or she has an even better advantage. I would also question your assertion that ATO employees lack professional experience or knowledge. Maybe some do, but many of them are indeed highly qualified-especially in tax law.0
- I am of the opinion that ASIC should do a probe and weed out these auditors. These prices only demonstrates this saying " Good advice is not Cheap and Cheap Advice is not Good"0
- they are not providing advice only a compliance service0
- Its funny how everyone looks at this as cheap v’s expensive. Has anyone done the maths? If you do 1000 funds with renting an office and 2 support staff one intermediate and one admin assistant you have over heads of say $50,000 (office) + $60,000 (intermediate) + $40,000 (admin) + $10,000 (electricity + IT etc) = $160,000. To break even you need to charge $160.00 an audit and you still need a wage. If you had a smaller business model and worked from home, husband and wife as a team, you can slash those overheads and remain competitive to those who are outsourcing.
Outsourcing is the real issue here as cost of capital is so low overseas we have to find ways to compete and running ‘lean’ is one of the options.
0- I agree, it's all about the business model. If an auditor can charge $400 per fund and still make a reasonable living, then that's up to them. You can't assume they are doing a shoddy job just because they charge a low fee.
Perhaps it really up to the high cost auditors to justify why they charge so much, instead of the other way round. After all, most SMSF's comprise a bank account, share portfolio, and maybe a rental property.
If the auditor is provided with all the supporting docs first time, I can't see why it would take more than a couple of hours to knock over the audit............which makes a fee of $900 - $1,100 pretty damn expensive in my view!0
- there are online audit software available which can cut your audit time to half - those using it can do the same work which a $400 auditors can in half the time0
- I agree 7.5 hrs is not enough time to do an audit. $1,500 gross a week is just not enough for a Mercedes.0
- I agree that an effective audit with the appropriate documentation, plan and program can not be done for such a low fee, no matter how efficient the auditor is. Furthermore, for those auditors who perform the appropriate audit procedures they should be applauded.0
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