Changes to SMSF auditor independence standards will impact hundreds of thousands of funds, with many required to find a new auditing firm by July 2021, according to an SMSF technical expert.
Heffron head of SMSF technical and education services Lyn Formica said the development earlier this year of a new independence guide by the Accounting Professional & Ethical Standards Board, which prohibits an SMSF auditor from auditing an SMSF if the auditor, their staff or their firm also prepared the financial statements for that fund, could affect at least 200,000 funds.
“Figures I have heard quoted is that, on that basis [of not being able to audit a fund], the ATO would be expecting 200,000 to 300,000 SMSFs to be changing their auditor as a consequence of these changed views of independence requirements,” Formica said.
She revealed SMSF auditors were waiting on further information from the ATO and professional bodies due to the size of the potential impact on the sector.
Further Formica said there was a real danger the sector could now face significant capacity constraints.
“We only have 5000 SMSF approved auditors and we will not be able to push all that work to those auditors,” Formica warned.
“There would not be sufficient capacity to do that, so my understanding is that we are in education mode from the ATO’s point of view.”
She noted the ATO will be contacting SMSF auditors where it can see from its own data that the auditor and tax agent are from the same firm and it is expecting people to have changed their processes from 30 June 2021.