This is an annualised decline in registered SMSF auditors of 4.9 per cent, Accurium noted, and a significant decline from the 7,032 SMSF auditors that were undertaking audits in the 2012-13 financial year.

Accurium noted that SMSF auditors had to comply with the revised independence requirements from the Accounting and Professional Ethics Standards Board from 1 July 2021.

“Many firms have had to put in place new external SMSF audit arrangements where they previously had an internal SMSF audit service and relied on the separation of duties model to comply with the independence requirement,” Accurium said.

“Similar to the introduction of the goods and services tax (GST) system way back on 1 July 2000, which saw many tax agents and practitioners decide to exit the industry, it appears that the new audit independence requirements are having a similar affect on the number of registered SMSF auditors.”

The actuarial firm pointed out that there has also been a trend of consolidation in the SMSF audit industry.

ATO statistics show that for the 2019-20 income year, 47.4 per cent of SMSF auditors completed at least five, but no more than 50, SMSF audits. Only 7 per cent of auditors completed more than 250 SMSF audits. 

However, the cohort that completed more than 250 SMSF audits actually audited 58.8 per cent of all SMSFs, whereas auditors who conducted no more than 50 SMSF audits only audited 11.3 per cent of all SMSFs.

“This concentration of audits with larger SMSF auditors has seen a small, but steady increase since 2015-16, up from 49.4 per cent. At the other end, the no more than 50 SMSF audits segment has seen a decline from 13.9 per cent,” Accurium noted.

Despite the number of SMSF auditors decreasing, however, there has actually been a decline in the average SMSF audit fee, with the average fee declining from $700 in 2015-16 to $660 in 2019-20, with the median staying steady at $550 for the same period.

While there have been improvements in technology over this period that allow audit costs to be maintained at these levels, Accurium questioned whether the current fees were sustainable, particularly if the current decline in registered SMSF auditors and increase in the number of SMSF continue on trend.

“It could be argued that some level of consolidation in the SMSF audit sector could be a good thing in terms of driving up standards. How much value can an auditor who audits less than five SMSFs a year really provide? A race to bottom on the price of audits could have the opposite effect,” the firm warned.

“It appears that there is a growing trend to consolidate audits into larger client bases to take advantage of the economies of scale and with the use of technology.”

Accurium stressed the importance of SMSF accountants and administrators being educated about the audit process and understanding what type of evidence needs to be submitted for an annual audit to ensure a smooth and efficient year-end.