ASIC has suspended the registration of three self-managed superannuation fund (SMSF) auditors for one year. ASIC determined auditors Wuzhao Fang, Huiting Li, and Xuan Wu breached independence requirements by auditing thousands of SMSF clients from a single referral source, who is a SMSF administration provider.
The SMSF administration provider offers online SMSF setup and administration, including assisting the SMSF trustee comply with their tax, accounting and audit obligations.
As a result of the SMSF administration provider engaging a limited number of SMSF auditors, these SMSF auditors received more than 99% of their overall audit fees from the online platform. ASIC found that this created self-interest and intimidation threats to the SMSF auditors' independence that were not able to be safeguarded against. Auditors must carefully evaluate referral arrangements, particularly where it creates a fee dependence.
Ms Wu's decision was reviewed at her request and an ASIC delegate confirmed the suspension decision. ASIC's decisions may also be reviewed at the Administrative Review Tribunal upon application by the SMSF auditor.
The referrals were made by the Australian Taxation Office (ATO). The ATO will continue to scrutinise the source of SMSF audit referrals and ASIC will take action where SMSF auditors fail to evaluate and address threats to their independence.
Background
Approved SMSF auditors are registered with ASIC under the Superannuation Industry (Supervision) Act 1993 (SIS Act) and must comply with the auditor independence requirements set out in APES 110 Code of Ethics for Professional Accountants (including Independence Standards).
ASIC and the ATO co-regulate SMSF auditors. The ATO monitors SMSF auditor conduct and refers matters to ASIC. ASIC also monitors the SMSF auditor population for non-compliance and is empowered to disqualify, suspend, cancel or impose additional conditions on the registration of SMSF auditors.
ASIC may suspend an SMSF auditor's registration under section 130F of the SIS Act. SMSF auditors have the right to appeal decisions ASIC makes in relation to their registration.
Further information can be found on ASIC's website and in Regulatory Guide 243 Registration of self-managed superannuation fund auditors. SMSF trustees and members can check whether their auditor is registered, suspended or has conditions imposed on their registration by searching ASIC's SMSF Auditor register.
