[It probably has] by virtue of the registration process that kicked in 12 months ago, but the tax office has always said that the auditors are their eyes and ears in the SMSF industry. So they’ve always been pretty keen, as have we, to make sure that there are enough competent auditors carrying out quality audits.

Do you think auditor registration has achieved that or is achieving that?

Definitely, and for a couple of reasons. So first of all there was rationalisation of the number of auditors, so they went from about 10,500 auditors to about 7,300 [registered] auditors now.

Most of the auditors who didn’t go through the registration process were those that were doing very low numbers of audits, so they were the ones that were most likely to not be … as competent at carrying out those audits as the people who were doing larger numbers. So that was a good outcome.

The second piece is for the first time, the tax office has been able to clearly identify who it is that is carrying out SMSF audits. And they’ve also been able to use that information… to do some data matching.

So they can start to identify risk factors and trends and so forth that are going on in the industry and that means they’ve been able to tailor their compliance activity accordingly.

What is your general view on low-cost SMSF audits?

There is no doubt that a low-cost audit, so [when] someone is charging a very low fee, it is a risk factor in assessing whether or not there is a quality audit being undertaken. But it is not a definitive indicator.

What someone charges for an audit is a commercial decision on their part, and as long as they are meeting their professional and ethical standards and carrying out a quality audit that complies with the auditing standards, what they charge really is their business. The problem is though that if someone is … only charging a low fee, are they genuinely putting in the time required to carry out a quality audit? And that’s what becomes the risk factor.

Do you think the ATO is keeping an eye on low-cost audits?

Yes I do. I imagine what they may do, if they see someone charging the low fee, and there are other risk factors involved, that might be cause for them to take a closer look at that particular auditor. So it might not be that they look at that in isolation, but that in conjunction with any other risk factors.

What do you think the key take-aways are for auditors in the current environment? Where do you think they should be focusing their energies?

I think they need to be very careful on a couple of fronts. One, they need to make sure their audits are being carried out in compliance with the standards, so that means making sure that they are getting all the evidence they need to form an opinion, that they are documenting their evidence so that if someone else came and had a look at their file, they would be able to clearly work thorough how the auditor reached their opinion on that audit.

Independence is another big issue. So the tax office has identified a number of auditors who had also offered tax agent services. Now that, in and of itself, is not an issue, but we talked before about risk factors [and that raises a red flag].

Liz Westover is the head of superannuation at Chartered Accountants Australia and New Zealand (CAANZ).