Recently, an Australian court ruled that the auditor of a self-managed super fund (SMSF) was liable for a client’s investment losses because they didn’t bring problems to the attention of the client when they audited the fund.
The case – Ryan Wealth Holdings Pty Ltd v Baumgartner – was the second case in Australia in the past six months that found an SMSF auditor liable for a client’s losses. In another case in July, Cam & Bear Pty Ltd v McGoldrick, the court concluded that responsibility for losses should be apportioned 10 per cent to the clients and 90 per cent to the auditor.
What do these rulings mean for you and your clients?
The Superannuation Industry (Supervision) Act 1993 (SISA) and the Superannuation Industry (Supervision) Regulations Act 1994 (SISR) both require that all super funds, regardless of their size or type, should be audited on an annual basis – so as an adviser to your clients, this is an important reminder both to you and to them to have those audits done by a professional, reputable firm that specialises in SMSFs.
Don’t risk your reputation or your relationship with clients by recommending an inexperienced or cheap auditor who might cut corners or fail to do the proper amount of work to obtain proof or evidence of the figures reported.
By recommending a ‘cheaper’ auditor, you may save clients some money in the beginning, but they – and you – could end up with much bigger losses in the long-term.
These cases are also a reminder to clients and accountants that high-quality work requires having the necessary documentation for review. Remember that:
• Administration and audit costs are inherent in SMSFs, and should be considered as part of the investment costs and explained to clients BEFORE they participate in these funds.
• Copies of financial statements and other documents will be requested at the time of the audit and are necessary for proper review.
What to look for
If you’re concerned about recommending or selecting an SMSF auditor for your clients, remember that a good SMSF auditing firm should:
• Be properly registered with the Australian Securities and Investment Commission (ASIC) and with the Australian Taxation Office (ATO).
• Be an experienced, external SMSF audit firm that’s not afraid to ask or answer tough questions.
• Be willing to meet with clients face-to-face.
• Ensure that all audits are completed on time and within Australia.
• Have a secure electronic data transfer service to provide required audit information and communicate with clients.
• Provide an SMSF audit checklist.
• Be able to assist in the event of a breach.
• Be clear and open about their fee structure from the beginning.
Have questions about SMSF audits? Contact Audit your Superfund today.