Licensing clouding audit obligations

Auditors are worried about falling foul of ASIC if they recommend that an SMSF be shut down.

12-Oct-2015

By Darin Tyson-Chan

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Auditors have raised concerns over their ability to properly fulfil the required professional obligations when auditing an SMSF without holding an Australian financial services licence (AFSL).

The issue was raised at last month’s Chartered Accountants Australia and New Zealand National SMSF Conference 2015 during a question and answer session with the professional body and the Australian Securities and Investments Commission (ASIC).

The potential situation causing most angst was where an SMSF audit had discovered non-compliance serious enough to leave fund closure as the only course of action.

Auditors expressed confusion over what they should do in those circumstances if they did not hold an AFSL and the SMSF trustees were not using an adviser.

Specifically, they said they were worried about falling foul of the corporate regulator because if they recommended to the client the SMSF should be shut down, they would be breaching the law of giving financial advice without a licence and if they did not make that recommendation, they would be in trouble with ASIC for not fulfilling their professional obligations as a registered auditor.

In response, ASIC senior manager Trevor Clarke said auditors should apply the existing principles of the licensing environment outside of the SMSF sector.

“Typically if you’re outside of the self-managed super fund space and you’re talking just generically about financial products, and something similar came up, you’d draw the line and say if you’re providing factual information, then that’s fine,” Clarke said at the conference on the Gold Coast.

“Where you’d cross the line is if you’re considering a personal circumstance of a client, then you need to be in a licensed environment. That’s just the way the regulations are.

“So in a situation like that outside the self-managed super funds sphere, you’d say [to the client] you need to seek professional advice.”

Concern was also raised that some practitioners might have already decided to apply for a full AFSL because they felt forced to do so as they recognised the advice issues about to surface under the new rules would be more widespread than just advising on establishments and wind-ups.

In response, Clarke acknowledged that to be a genuine concern, but said the regulator did not have any data that could confirm that was happening.

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