Blatant independence breaches such as auditors who audit their own SMSF or those of close family members have long attracted the ATO’s attention.

The ATO has also previously had its sights on SMSF auditors who enter reciprocal auditing arrangements where two auditors with their own SMSFs agree to audit each other’s funds.

Based on the responses to a recent survey, the ATO said that some auditors believe that independence risks arising from reciprocal auditing arrangements can be safeguarded against.

“It is the view of the ATO and ASIC that there are no safeguards that can reduce the threats to independence arising from this type of arrangement,” it stated.

Another type of arrangement which is also raising concerns for the ATO more recently is where two professional accountants, who are also SMSF auditors, prepare the accounts for a number of SMSFs and enter into an arrangement to audit each other’s clients’ SMSFs.

SMSF professionals should safeguard against this, the ATO said, by ending these reciprocal arrangements or spreading referrals to a number of different SMSF auditors to minimise reliance on this source for SMSF audits.

“Approved SMSF auditors who continue to engage in reciprocal auditing arrangements will be subject to increased scrutiny. Referral to ASIC may result if we consider SMSF auditors have failed to meet the independence requirements,” the ATO warned.

The ATO said that SMSF auditors should consider some of the potential threats to independence that are set out in Accounting Professional and Ethical Standard (APES) 110 Code of Ethics for Professional Accountants including self-interest, familiarity and intimidation.

“An SMSF auditor having a close relationship with, or a high regard for, the other auditor may be influenced to ignore certain issues or to undertake a cursory and inadequate SMSF audit,” the ATO stated.