Last week, law firm Mackay Chapman filed a suit in the Federal Court in Sydney on behalf of 24 victims of Ms Caddick.

The filing alleged that the auditors engaged to review the annual financial reports for the SMSFs failed to identify fraudulent documents prepared by Ms Caddick and failed to confirm that the assets said to be held by the SMSFs existed.

It further alleges that auditors were negligent, engaged in misleading or deceptive conduct and/or representations, and breached the Corporations Act and ASIC Act.

According to the law firm at least five auditors were engaged to conduct the mandatory annual audit of the SMSFs between 2012 and 2020.

Mackay Chapman also alleged that capital losses of around $12 million will be claimed, relating to 24 funds representing around 50 investors.

The firm said in a media release that “the financial reports reviewed by the auditors were supported by fraudulent documentation prepared by Ms Caddick and the assets said to be held by the SMSFs did not exist”.

Ms Banton told SMSF Adviser it is outrageous to think an entire cohort of SMSF auditors have had their professional reputations tarnished by the five named in this class action.

“SMSF auditors who purposefully avoid their professional responsibilities for many reasons, such as a lack of auditor independence, poor documentation, failure to report non-compliance and a conflict of interest, should be held responsible for their negligence,” she said.

“The outcome of this class action will rely on the facts and circumstances of each SMSF auditor's audit file and whether it contains sufficient appropriate audit evidence to substantiate their opinion.”

Ms Banton said there would be no class action if Ms Caddick's clients still had their money, and these types of lawsuits are the exception, not the rule.

“SMSF auditors are proudly committed to safeguarding Australians' retirement wealth and the integrity of the superannuation system,” she said.

If the case is successful, media reports suggest that more than a million SMSF investors could be affected by the doubt cast by a questionable audit system.

Ms Banton said recent ATO scrutiny and action against auditors is not an indication the SMSF audit sector is deteriorating.

She said there are about 4,000 active auditors and recent regulatory changes have seen a “reset” of the sector.

“We have more than enough auditors, and people underestimate the power of technology here,” she said.

“The problem is auditors who do a handful of funds each year cannot keep up with the standards and issues in the industry,” she added.