Crack down on auditor independence by ATO for 2016/17 FY
The ATO has been clear that risks to independence are a focus in the 2016-2017 financial year, as is the assurance that SMSF auditors are complying with all of the independence requirements set out by the APES Code of Ethics for Professional Accountants.
Here are a number of key threats to auditor independence which are being focused on by the ATO in the current financial year:
Self reviews This is the threat of an SMSF auditor who also acts as a tax agent for the fund. Self-reviews are a threat to independence and auditors are required to safeguard independence and remove themselves when they are concerned about compliance.
Reciprocal audits The process where an auditor will audit their auditor’s fund. This process can lead to self-interest threats and creates a disincentive to question the other practitioner’s work. ASIC and the ATO have an issue with reciprocal audits and require a third party that is independent to undertake an objective audit.