We are certainly seeing firms taking a proactive approach in terms of considering the requirements. Many firms are looking at alternative audit arrangements now to ensure they have what is required in place before the cut-off date. But having said that, I’m sure there are lots of firms that will continue to perform audits in-house until the date of the ATO deadline.

What are some of the myths or areas of confusion circulating in terms of the restructured code and guidance? 

So far, the biggest myth I’ve seen going around is that the use of software will mean you can say the accounting services provided are routine and mechanical. Having a software package at the accounting firm does not make the service being offered to the trustee routine and mechanical. The use of software doesn’t remotely change the trustee’s ability to take management responsibility for the preparation of the financial report. It doesn’t change the trustee’s level of knowledge and understanding, and it doesn’t change the ultimate service being provided to the fund. All it changes is how that service might be performed, but not the service offering. 

Trying to say the preparation of the financial report is routine and mechanical because you use data feeds and a software platform that makes the process easier and streamlined doesn’t mean the service is routine and mechanical. Firms that take this approach are likely to receive scrutiny from the ATO.

What are some of the hurdles for the SMSF industry with this independence guidance in terms of finding new SMSF auditors for clients, restructuring services and, for independent audit firms, managing a large influx of new clients? 

Consideration will need to be given as to whom might provide the audit service, and what the nature of their operations are. Accountants should be evaluating whether the auditor aligns with their firm’s core values, for example. An accounting firm that does not want offshoring, or doesn’t have clients open to audit services being provided offshore, will need to ensure the auditor they pick performs the audit work locally. 

Auditors will need to be mindful of their capacity limits to ensure they are able to complete the work in a reasonable time frame. 

Other hurdles include in-house auditors considering stepping away from the firm in the hope they can pick up those audits in 12 months’ time. The ATO has said you’d need a two-year break from the firm and firm clients to ensure the independence threats are reduced sufficiently. Of course, general independence issues need to still be considered and reviewed — a new auditor can have independence threats due to fee dependency risks in the early days while they build up their client base.

Personally, we are ensuring we are having detailed conversations regarding our services and how we operate. There is no point picking up lots of new clients, only to have ongoing conflict about how you perform your audits. It’s best to have those conversations up front to ensure you are a good fit and that teething problems are minimised.