Is independence really so difficult? Comments on APES110 Auditor independence

The APES 110 Code of Ethics for Professional Accountants (including Independence Standards) has been in the news more recently as the SMSF Association has sought to secure an extension for the deadline by which auditors are required to comply with the amended independence standard defined by APES 110.

There has been plenty of news, social media commentary, podcasts and discussion groups about the new independence standards.

Many “only audit’ firms are out in the marketplace feverishly pushing their services in this “once in a lifetime” opportunity to pick up new SMSF audit clients.

At the same time, Australian based SMSF audit firms are feeling the price pressure from offshore providers, and continually try to differentiate their SMSF audit offering in order to justify a higher audit price.

We’re also seeing a bit of juggling from some of the Australian based SMSF auditors who have an entity with their SMSF audit team and a separate entity with their SMSF tax preparation services.  These will obviously be a target for the ATO once the new standard takes effect.

Meanwhile, per the article, the SMSF Association members have requested a long lead time to allow firms to make the changes they need to make.

The ATO has indicated their approach to compliance with this independence issue during the 2020/21 income year is to provide support and guidance to assist auditors to comply with the requirement of the new code, with the expectation firms consider restructure of their firm or audit engagements.

There’s been reasonably good feedback to the concept of the SMSF Audit pool, though some reservations have been raised to ensure it is a completely independent pool, and not a round robin of accountants swapping audits for other compliance work on a larger scale. The ATO has said reciprocal arrangements are a potential independence issue.

With the SMSF Association requesting additional time to implement the independence requirements, at the moment it just looks like independence might just have to wait a while longer.

If you need assistance with SMSF audit then please drop ACSA a line.