“We think it is best practice for firms to avoid engaging in these arrangements and find an auditor who is completely independent,” Ms Grant said in a recent SMSF Adviser podcast.

“This is because that auditor is then less likely to have any hesitation about qualifying an audit report for the client.”

If firms do insist on using a pooling arrangement, however, Ms Grant said they need to be aware of addressing any threats that could arise if some of the firms within the pool end up reciprocating some referrals.

“They could do this by ensuring the pool is big enough to enable a broad auditor referral base and therefore avoid any self-interest threats that could arise from fee dependency or familiarity or intimidation threats that might arise where there is a close relationship between two auditing/accounting firms,” she explained.

The ATO has previously made clear that where two SMSF firms enter a reciprocal auditing arrangement and audit each other’s fund, they will be at risk of breaching their independence requirements.

“This kind of arrangement can inappropriately influence the auditor’s judgement and behaviour if the auditing firm is solely dependent on those fees,” she warned.