Ms Grant explained it will be very difficult for clients of in-house auditing firms to fall within that routine and mechanical exception because they are required to take on management responsibilities.

They need to have the requisite knowledge, skills and experience in order to make decisions that normally management would make, she stressed.

“In which case, auditing firms should be thinking about how they can restructure their audit engagements in order to meet these global independence standards,” she said in a CPA podcast.

“Potentially, in five years’ time, there may no longer be a routine or mechanical exemption anymore. So, our advice is to get prepared now rather than later.”

She also noted that following some of the questions received by the ATO from SMSF administration firms on what types of structures would be acceptable under the new guidance, the ATO is planning to incorporate further guidance on this as part of the information it is issuing to auditors.

Ms Grant previously warned that firms that enter reciprocal auditing arrangements with another firm may create another independence issue.

“That can cause them to rely on the one referral source. This kind of arrangement can inappropriately influence the auditor’s judgement and behaviour if the auditing firm is solely dependent on those fees,” she explained.

The ATO has also made clear that simply because an SMSF client has recurring transactions or simple investments on data feeds through SMSF software, this is not enough for the client to be classified as routine or mechanical.

“We also often find that the firm was responsible for setting up the accounting software which classifies the transactions from the data feeds, and of course, we all know that mistakes can be made with those data feeds which normally the firm takes responsibility for rather than the trustee,” she stated.