Members must comply with the relevant ethical requirements pertaining to audits, including independence requirements
Members must exercise their professional judgement as to whether they are independent, based on the particular circumstances of the engagement. To determine whether an auditor is independent requires the auditor to apply the conceptual framework approach, as described in APES 110, sections 100.6-100.11 and 290.4-290.12. Determining whether the auditor is independent in relation to the audit of a SMSF client requires the auditor to exercise professional judgement based on the particular circumstances with which the auditor is faced. The auditor needs to identify and evaluate the threats to independence and when necessary, apply safeguards to eliminate or reduce the threats to an acceptable level. Amongst other things, the Code provides the following guidance on what is an acceptable level:
"The Member shall exercise professional judgement and take into account whether a reasonable and informed third party, weighing all the specific facts and circumstances available to the Member at the time, would be likely to conclude that the threats would be eliminated or reduced to an Acceptable Level by the application of the safeguards, such that compliance with the fundamental principles is not compromised." Refer paragraph 100.7.
To assist auditors in determining independence, other guidance is provided in the form of the Independence Guide (especially section 9 – Special consideration: self-managed superannuation funds) and GS 009 Auditing Self-Managed Superannuation Funds, Appendix 5 (GS 009).
Members should carefully consider the following points when determining independence. If you need to stop and consider whether or not you are independent, the chances are that threats to independence do exist and you need to determine the significance of threats identified and apply safeguards to eliminate or reduce the threats to an acceptable level. Third parties will also find it difficult to adjudge that you are not independent if you have:
- appropriately applied the conceptual framework approach
- appropriately exercised professional judgement
- clearly documented the process and conclusions in determining independence.
The ATO does not have its own independence rules and requirements in relation to audits of SMSFs. The independence requirements applying to audits of SMSFs are those outlined in APES 110.
Utilising a conceptual framework approach (as described in APES 110, Sections 100.6-100.11 and 290.4-290.12) in determining independence requires the auditor to exercise professional judgement based on the particular circumstances with which the auditor is faced. The auditor is in the best position to identify and evaluate the threats to independence and when necessary, apply safeguards to eliminate or reduce the threats to an acceptable level. CPA Australia staff are unable to be acquainted with all the circumstances faced by the auditor and therefore cannot provide a definitive response to the member. CPA Australia staff can, however, direct members to appropriate references for guidance.