The Australian Taxation Authority (ATO) is missing an opportunity to provide proper oversight of the annual audit process for Self-Managed Super Funds (SMSFs).
eSAT is an electronic super audit tool developed by the ATO. The eSAT assists super auditors with reference material, completing the compliance audit, and lodging Online Auditor Contravention reports (ACRs). Yet there is no obligation for SMSF auditors to lodge a copy of their Annual Audit Report directly to the ATO via eSAT or any other means.
Instead, the obligation to notify the ATO that the annual audit has been completed, and if Part A of the audit report (but not Part B) has been qualified, has been delegated to the tax agent. It is their responsibility to properly complete the relevant section of the SMSF annual return.
This system of reporting has created false reporting opportunities by some tax agents and trustees, which has resulted in recent actions by the ATO. They have been requesting a sample of auditors to manually compare their list of 2017 Audit Reports prepared against the ATO’s list, and voluntarily report any exceptions.
Whilst this is a positive step of enforcement by the ATO, it is surprising that technology has not been fully embraced to implement tighter systems and controls to properly monitor if and when audit reports are being prepared annually for each SMSF. I’m uncertain if this was even contemplated in the current Government’s proposed triennial audit process.
There are always a number of solutions to problems. One such possibility is that the functionality of eSAT could be expanded to oblige auditors to electronically upload their annual SMSF audit reports into this tool. This will provide real time validation directly to the ATO from the SMSF auditor that particular superfunds have met their annual audit obligation.
Further, and more importantly, it would provide deeper insight to the ATO about the nature of all audit report qualifications, especially compliance breaches in Part B of the audit report which is not currently reportable to the ATO other than in an ACR.
We are in the digital age where data is now readily transferable electronically. To minimise the extra work of SMSF auditors reporting to the ATO, it would be seamless for the technologically advanced SMSF audit platforms to electronically transfer audit reports and ACRs via a data feed directly into eSAT if the ATO opened up such a gateway. This would enable a real-time exceptions analysis by the ATO, allowing them to more proactively regulate the SMSF audit industry. At Evolv, our audit platform called Evolv White already has the capability of pushing and pulling data to and from other systems.
If you concur that this is a feature that will limit the misuse of your auditor registration, we would appreciate hearing from you to support our request to the ATO to open this gateway to our super audit platform.