ATO takes aim at ‘you-scratch-my-back’ auditing arrangements
It has long been an accepted standard that the auditor of an SMSF needs to be independent of that fund, and be a third party entity to the SMSF. This requirement is written into the legislation.
There have of course been breaches of this requirement, and instances where auditors and/or fund trustees have suffered administrative penalties or even disqualification for non-compliance in this area.
The more blatant breaches of the requirement to use a third party auditor involve someone auditing their own SMSF, or the fund of close family members. But another concern for the ATO relates to auditors who enter into arrangements that reflect that old idiom “you scratch my back, I’ll scratch yours”. The ATO has labelled these as reciprocal auditing arrangements.
It says that such arrangements arise where two or more auditors, each with their own SMSF, agree to audit the other’s fund. The ATO likens the situation to the scenario of a two-partner practice where one partner takes on the work of auditing an SMSF of which the other partner is trustee. […]