Competency standards for Fellows of the NTAA auditing SMSFs
Competency standards for Fellows of the
NTAA auditing SMSFs
National Tax & Accountants’ Association Ltd.
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Competency standards for Fellows of the NTAA auditing SMSFs
Contents
Introduction……………………………………………………………………………………..3
Background……………………………………………………………………………………. 4
Auditing an SMSF…………………………………………………………………………….. 5
The planning phase of the audit – ASA 300…………………………………….. 5
Performing the financial audit of an SMSF……………………………………….9
Performing the SIS compliance audit of an SMSF …………………………….. 10
Forming an audit opinion on an SMSF…………………………………………... 12
Minimum Continuing Professional Development (“CPD”) requirements ……………….. 13
Disciplinary procedures for Fellows of the NTAA………………………………………….. 14
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National Tax & Accountants’ Association Ltd.
Competency standards for Fellows of the NTAA auditing SMSFs
Introduction
Recent ATO information has revealed that the number of self managed superannuation funds
(“SMSFs”) increased by approximately 47,500, during the period of 1 January 2007 to 31
December 2007.
Furthermore, in a speech delivered by the Commissioner of Taxation, Michael D’Ascenzo, on 12
March 2008, he indicated that the value of assets currently managed in SMSFs has grown to
almost $300 billion. Other ATO and Treasury estimates have also revealed that the current
range of tax concessions offered to SMSFs cost the government approximately $10 billion
annually.
Naturally, the unprecedented growth in SMSFs has escalated the importance of the role being
played by SMSF trustees and approved auditors in ensuring that SMSFs comply with
superannuation law.
SMSF trustees are empowered to make many decisions regarding the operation of an SMSF and
the investments undertaken by the fund. However, SMSF trustees must also ensure the fund is
operated in accordance with the superannuation laws governing the running of the fund and they
must also ensure that all investments undertaken (or maintained) by the fund also comply with
the superannuation investment rules.
In addition, trustees of an SMSF must also appoint an ‘approved auditor’ to conduct a financial
and SIS compliance audit of an SMSF. An approved auditor is a person specified within SIS
regulation 1.04(2) who does not have a disqualification order in force. Refer to S.35C and S.131
of the Superannuation (Industry) Supervision Act 1993 (“SIS Act”).
Importantly, an approved auditor is expected to exercise an appropriate level of competency
when discharging their audit responsibilities.
As a result, the National Tax & Accountants’ Association Limited (“NTAA”) has now formalised a
set of competency standards which Fellows are expected to satisfy before they are permitted to
audit an SMSF. These competency standards have been devised to ensure that Fellows of the
NTAA (who qualify as approved auditors) have the requisite level of skill and knowledge that is
necessary when properly auditing an SMSF.
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Competency standards for Fellows of the NTAA auditing SMSFs
Background
It is only an approved auditor who is empowered to audit an SMSF’s financial statements and
conduct a SIS compliance audit. It should be noted that there are substantial fines and penalties
imposed on individuals who are not regarded as approved auditors and who conduct an audit of
an SMSF.
An approved auditor is defined under SIS Regulation 1.04(2) as a registered company auditor or
a person who is a member of any of the following bodies:
Professional body/association
Category of membership
needed to audit SMSFs
National Tax and Accountants’ Association Ltd
Fellow
CPA Australia
Member
Institute of Chartered Accountants in Australia
Member
National Institute of Accountants
Member
Association of Taxation and Management Accountants
The Auditor-General of the Commonwealth, a State or a
Territory of Australia.
Member or Fellow
Not applicable
However, a person cannot be an approved auditor if there is a disqualification order in force
under S.131 of the SIS Act. This may occur where the Regulator (i.e., the Commissioner of
Taxation) has made a written order disqualifying a person from being an approved auditor.
Once an approved auditor has been appointed, they must provide trustees of an SMSF with an
audit report on the operations of the fund for the relevant income year. The audit report must be
provided in an “approved form” and it must review the fund’s financial accounts and compliance
with the SIS Act and Regulations. The approved form breaks the audit into two segments, being
the financial report audit and the SIS compliance audit. Approved auditors can insert additional
information if the scope of the audit extends, however, they cannot reduce the scope of the audit.
The Auditing and Assurance Standards Board (AUASB) have also issued Australian Auditing
Standards (“ASAs”) which provide the minimum requirements an auditor must satisfy when
discharging their audit function.
These new mandatory auditing standards came into effect from 30 June 2007.
These auditing standards apply to “approved auditors” who conduct an audit of an SMSF for any
income year ending on or after 30 June 2007. That is, approved auditors will be required to
comply with the mandatory audit standards for audits they conduct on SMSFs for the 2007
income year and following.
A copy of these NEW mandatory auditing standards can be found on the AUASB website at
www.auasb.gov.au.
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National Tax & Accountants’ Association Ltd.
Competency standards for Fellows of the NTAA auditing SMSFs
Auditing an SMSF
Auditing an SMSF involves a number of specific stages in which approved auditors must be able
to demonstrate a level of competency. These stages are as follows:
1. The planning phase of the audit – ASA 300;
2. Performing a financial audit of an SMSF;
3. Performing the SIS compliance audit phase on an SMSF; and
4. Finalising the audit (including forming an audit opinion).
Importantly, approved auditors must understand each of the stages mentioned above and be
familiar with the specific requirements contained within the Australian Auditing Standards.
In addition, approved auditors must also consider the paperwork requirements associated with
auditing an SMSF under the Australian Auditing Standards. In particular, ASA 230 specifies the
audit working papers (i.e., documentation) an approved auditor is expected to maintain as part of
auditing an SMSF. This auditing standard provides guidance but does not prescribe the required
extent of audit working papers because this is almost impossible. At a minimum, the audit work
papers should show:
•
the nature, timing and extent of procedures;
•
the conclusions reached from those procedures; and
•
significant matters identified from those procedures and the conclusions.
Sufficient evidence relates to the quantity of audit evidence required to draw reasonable
conclusions – see ASA 500. Professional judgement is to be exercised by the auditor after
contemplating issues such as high risk areas requiring additional evidence. Reliability of
evidence is influenced by the independence of the source and an assessment of materiality of the
item being audited.
Approved auditors should also remember that the quality of their working papers will also
represent objective evidence on their level of competency. Comprehensive audit working papers
also give approved auditors the ability to vindicate their audit opinions and provide evidence on
their process for evaluating quality control procedures of the fund and within the accounting firm.
1. The planning phase of the audit – ASA 300
Naturally, before an approved auditor can commence the audit of an SMSF, they need to plan the
scope of the audit.
In the past, the planning phase was largely at the discretion of the approved auditor. In most
cases, this process would normally only include the relevant documentation (e.g., engagement
letters and trustee representation letters) which had a direct influence on the audit. In effect, an
approved auditor had the capacity to streamline auditing an SMSF by conducting a
comprehensive plan before completing the audit.
However, under the NEW ASA 300, approved auditors are now required to document the overall
audit strategy and audit plan. An approved auditor is also required to document any significant
changes that have been made during the course of the audit engagement by the approved
auditor.
Furthermore, an approved auditor is compelled to contact the previous auditor (where
appropriate) relative to the ethical requirements for the audit engagement.
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Competency standards for Fellows of the NTAA auditing SMSFs
Using appropriately drafted engagement letters
An engagement letter can be used by an approved auditor as a mechanism for establishing the
level of legal responsibility they accept in an audit engagement. This document may allow an
auditor to stipulate the terms of the audit and, if properly drafted, can serve to significantly reduce
confusion regarding the scope of an audit. The engagement letter must be drafted in accordance
with ASA 210 ‘Terms of the Audit Engagement’, which addresses the nature and scope of the
audit engagement.
Ideally, an engagement letter should address the following matters:
•
the scope of the audit;
•
the responsibilities of the approved auditor including those imposed by S.129 and S.130 of
the SIS Act;
•
the responsibilities of the trustees, including the maintenance of a satisfactory internal control
system, the maintenance of trustee minutes for at least 10 years, and compliance with SIS
requirements;
•
any mandatory requirements contained within ASA 210;
•
an outline of the general audit procedures; and
•
the audit fee arrangements.
An approved auditor is not required to issue an annual engagement letter to a recurring client
(e.g., the trustees of an SMSF) unless the terms of the engagement are revised or the auditor
believes it is prudent to re-confirm the nature of the engagement.
Applying the concept of auditor ‘independence’
All approved auditors should consider the remarks on ‘auditor independence’ as defined within
the Australian Auditing Standards. An approved auditor must be able to demonstrate they have
conducted an audit independently and that they have complied with the requirements prescribed
by their professional association.
In practical terms, an auditor can demonstrate ‘independence’ where a reasonable person would
conclude the auditor has put themselves in a position whereby their objectivity will not be
compromised.
However, an auditor must also remember that the concept of independence is defined within the
Auditing Standards. At Paragraph 15 and 16 of Australian Auditing Standard ASA 220 “Quality
control for audits of historical financial information”, the standard requires that a partner of an
accounting firm must make the assessment regarding possible breaches associated with
performing the auditing function independently.
To that end, Paragraph 15 of ASA 220 makes reference to the following issues for the partner of
an accounting firm to consider as part of the engagement:
•
Obtain relevant information from the firm and, where applicable, network firms, to identify and
evaluate the circumstances and relationships that create threats to independence;
•
Evaluate information on identified breaches, if any, of the firm’s independence policies and
procedures to determine whether they create a threat to independence for the audit
engagement;
•
Take appropriate action to eliminate such threats or reduce them to an acceptable level by
applying safeguards. The engagement partner shall promptly report to the firm any failure to
resolve the matter for appropriate actions; and
•
Document conclusions on independence and any relevant discussions with the firm that
support these conclusions.
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National Tax & Accountants’ Association Ltd.
Competency standards for Fellows of the NTAA auditing SMSFs
Devising an audit plan in accordance with ASA 300
The planning stage is arguably the most important part of the audit process as it develops a
strategy to ensure that the responsibilities of the approved auditor are fulfilled.
The following table lists the matters that the auditor must consider when preparing an audit plan.
Planning issue to be
considered
Possible factors
Knowledge of the SMSF –
ASA 315
In planning the audit of an SMSF, the auditor would include a
consideration of the general economic factors and industry
conditions affecting the SMSF.
The auditor should also be aware of the important characteristics
of the SMSF, its activities and financial performance, specific
reporting requirements and any changes since the last audit.
An assessment of the general competence of the trustees should
also be made.
Internal control structure
of the SMSF – ASA 315
The auditor should consider the accounting policies of the SMSF.
The auditor should note the potential impact of any new
accounting or auditing pronouncements issued by the accounting
profession.
The auditor should also use their overall knowledge of internal
controls to determine the degree of testing of control and
substantive procedures.
Co-ordination, direction,
supervision and review of
the audit process
In planning the SMSF audit, the auditor should consider the need
to obtain expert opinions (e.g., from actuaries) in the audit.
Risk and materiality issues
– ASA 320
The auditor should consider what will be the significant audit
areas and the expected assessments of the inherent risks and
control risks of an SMSF.
The auditor should also identify what staffing requirements need
to be addressed, such as the number of staff required and their
experience.
The auditor should establish the materiality levels for the financial
reports of the SMSF. Consideration must be given to whether the
matter has been specified in the approved form, in which case the
approved auditor must notify the ATO (as Regulator). It is these
breaches which may culminate in the audit report being qualified
and notification to the ATO.
When considering the issues of risk and materiality, the auditor
should be aware of the possibility of a material misstatement,
fraud or a breach of the SIS Act.
This assessment should also consider the identification of
complicated accounting issues, including valuations and
estimates.
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Competency standards for Fellows of the NTAA auditing SMSFs
Planning issues to be
considered
Possible factors
Nature, timing and extent
of audit procedures
In planning the SMSF audit, the auditor should be aware that
circumstances may arise during the course of the audit which
may change the emphasis in specific audit areas (e.g., a fraud is
identified).
The auditor should consider the impact of information technology
on the audit, for example, internet-based share transactions.
The auditor should consider the need for sampling techniques
and analytical procedures as part of the method of obtaining
sufficient audit evidence.
Auditors need to be aware of the various time frames in respect of
lodgement of the income tax return. Once the lodgment dates for
individual funds have been established, auditors will need to
communicate the time required to complete the audit to trustees
to ensure the tax and auditing deadlines can be met.
Other issues to be
considered
In planning the SMSF audit, the auditor must be mindful of the
following issues:
•
Types of investments;
•
The auditor must ensure that the SMSF is a going concern;
•
The existence of related parties to the SMSF (i.e., where the
fund purchases assets from related parties) may cause issues
to arise during the audit;
•
The terms of the audit engagement (i.e., refer to the
engagement letter) and any statutory responsibilities (i.e., the
SIS Act); and
•
The nature and timing of any reports or other communication
with the entity that are expected under the engagement.
Competency objectives in audit planning phase
An approved auditor should be capable of demonstrating knowledge in the following areas when
undertaking the planning phase of an SMSF audit:
•
An awareness of the ethical standards associated with any engagement (this includes an
awareness of the need to demonstrate auditor independence and ethical clearance issues for
new engagements);
•
The terms of the audit engagement. In most cases, this will require approved auditors to
specify the nature of their engagement (via an engagement letter) and responsibilities they
undertake by accepting the engagement;
•
The planning phase of the SMSF audit. This would include the ability of the approved auditor
to document the overall audit strategy and audit plan (as required by ASA 300). Approved
auditors also need to document any amendments to the audit plan; and
•
A detailed understanding of the SIS compliance issues which need to be examined as part of
the audit. Approved auditors should be sufficiently familiar with the ATO’s expectation in this
regard and this information can be found in the ATO’s publication titled ‘Roles and
responsibilities of approved auditors’.
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National Tax & Accountants’ Association Ltd.
Competency standards for Fellows of the NTAA auditing SMSFs
2. Performing a financial audit of an SMSF
A financial audit is generally designed to ensure that all information contained in the financial
statements is a correct reflection of the financial position of the SMSF, and this allows the auditor
to assess whether the fund is a going concern. The review will need to consider issues
associated with the existence, completeness, valuation (i.e., accuracy) and disclosure of
information in the fund financial statements and income tax return.
In effect, the fundamental purpose of a financial audit is to ensure that the financial accounts
materially reflect the financial position of the fund. As such, approved auditors must ensure they
identify any risks associated with the financial statements which may lead to a material
misstatement of the fund’s financial position.
Accordingly, a financial statement audit of an SMSF needs to review the following aspects of the
relevant fund:
•
Contributions received by the fund;
•
Investments/assets of the fund;
•
Income/expenses of the fund;
•
Benefits paid by the fund;
•
Liabilities; and
•
Other considerations.
Approved auditors need to undertake a thorough examination of the above issues when
reviewing an SMSF (including the ‘assertions’ that are effectively being made in representing that
the financial statements give a true and fair view – refer ASA 500).
Competency objectives in financial auditing phase
An approved auditor must be able to demonstrate the following competencies when undertaking
a financial audit of an SMSF:
•
The ability to identify any risks which may lead to a material misstatement in the fund’s
financial statements;
•
Application of the concept of materiality to the financial audit. The auditor may determine
materiality based on a percentage of the fund balance or change in net assets. The
percentage adopted by an auditor in this calculation will depend on the auditor’s assessment
of risk.
It should be noted, that to fully comply with ASA 320, qualitative matters will need to be
considered (such as the nature of the item involved) as part of the audit;
•
Audit procedures in the event the approved auditor identifies areas of risk associated with the
financial audit of the fund;
•
An ability to evaluate controls, particularly where they involve direct access to assets of the
superannuation fund. By way of example, an approved auditor should closely consider
controls in relation to banking of the fund and investments involving related parties of the
fund;
•
An understanding of the auditing standards as they pertain to evaluating and testing the
controls environment of the relevant SMSF;
•
An understanding of the concepts involving gathering auditing evidence, audit sampling,
documentation and financial assertions; and
•
Ensure separate audit working papers and file are created and maintained in a manner that
would allow a peer who has had no involvement with the fund to gain an insight in the work
completed and the audit opinion that has been reached.
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Competency standards for Fellows of the NTAA auditing SMSFs
3. Performing the SIS compliance auditing phase
The second phase of an SMSF audit is a review by the approved auditor of the fund’s compliance
with the SIS Act and Regulations.
The SIS compliance phase normally occurs once the auditor is satisfied that there are no material
misstatements within the financial statements of the fund. In the SIS Compliance audit phase,
the auditor must determine whether the fund has complied with the general (e.g., sole purpose
test) and specific (e.g., borrowings by trustees) operational restrictions placed on complying
SMSFs.
Under S.42A(5) of the SIS Act, an SMSF will pass the compliance test if the trustees did not
contravene the SIS Act or its regulations. This requirement, however, is qualified, as the ATO is
required to give consideration to the following if a contravention occurs:
•
the taxation consequences if treated as non-complying;
•
the seriousness of the contravention; and
•
any other relevant circumstances.
Listed below is a summary of the steps that an approved auditor must undertake when
completing a compliance audit of an SMSF.
Audit consideration
Explanations and examples
1. Is the fund a self
managed
superannuation fund?
A superannuation fund will satisfy this requirement where both of
the following questions have been satisfied:
2. Has the fund been
operated pursuant to
the sole purpose test?
•
Does the fund satisfy the definition of a self managed
superannuation fund under S.17A of the SIS Act?; and
•
Did the trustees of the fund elect to be a regulated fund and
thus be governed by SIS Act and regulations?
Auditors may find it difficult to apply this requirement because the
sole purpose test is inherently subjective. Nevertheless, the sole
purpose test will be satisfied where:
•
3. Has an investment
strategy been prepared
& implemented?
In broad terms, the trustees can demonstrate the fund has
been maintained for the sole purpose of providing benefits for
members on their retirement, or for their dependants in the
event the member dies.
A fund will satisfy the investment strategy requirements where the
trustees have formulated and given effect to an investment
strategy.
An investment strategy needs to take into account the following
factors:
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•
The risk involved in making, holding and realising an SMSF
investment;
•
The composition
diversification);
•
The liquidity of the SMSFs investments having regard to its
expected cash flow requirements; and
•
The ability of the entity to discharge its existing and
prospective liabilities.
of
the
entity's
National Tax & Accountants’ Association Ltd.
investments
(i.e.,
Competency standards for Fellows of the NTAA auditing SMSFs
Audit consideration
Explanations and examples
4. Has the fund complied
with the investment
restrictions?
An auditor must ensure that all investments of an SMSF have
complied with the rules contained under the SIS Act and
regulations. Some of the more common restrictions that need to
be considered are as follows:
5. Have the contribution
and benefit payment
standards been
satisfied?
•
Have the in-house assets rules been satisfied?;
•
Have the restrictions regarding lending and providing financial
assistance been satisfied?;
•
Has the fund breached restrictions associated with acquiring
assets from members?;
•
Has the fund breached the borrowing restrictions?; and
•
Have the trustees provided a charge over any of the fund’s
assets?
The payment standards operate in conjunction with the sole
purpose test and ensure that payments are only made to
members when a condition of release has been satisfied.
Some of the more common issues to consider are as follows:
6. Have the administrative
and documentation
requirements been
satisfied?
•
Have the voluntary cashing of benefits requirements been
satisfied before payments were made to members?;
•
Did the trustees maintain sufficient documentation when
making in-specie distributions of benefits to members of the
fund?; and
•
Have the trustees satisfied all administrative obligations
before paying a pension to a member?
This requirement largely relates to the record-keeping obligations
under the SIS Act. Some of the more common requirements to
consider are as follows:
•
Appointing an approved auditor;
•
Making all documents available to auditors which relate to
accounts and statements; and
•
Reporting information to the ATO regarding the total
contributions made by the member for the purposes of the
contribution capping rules.
Competency objectives in the SIS compliance auditing phase
An approved auditor must be able to review the following aspects of an SMSF when undertaking
a SIS compliance audit of an SMSF:
•
A detailed understanding of the operational and investment restrictions which are imposed
under the superannuation laws;
•
An understanding of the documentation (i.e., paperwork) requirements trustees of an SMSF
must satisfy when complying with the SIS Act and regulations. By way of example, trustees
of an SMSF must record minutes of all meetings held in which matters affecting the fund were
discussed and these minutes must be kept for at least 10 years; and
•
A detailed understanding of the audit sampling and documentation expectations which must
accompany any audit of an SMSF.
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Competency standards for Fellows of the NTAA auditing SMSFs
4. Forming an audit opinion on an SMSF
Once an approved auditor has conducted their testing and completed a financial and SIS
compliance audit they must then issue an opinion in relation to the fund. The audit opinion must
be made in relation to whether the financial statements of the fund materially reflect a true and
fair view of the fund. An approved auditor must also then form an opinion on whether the trustees
of the fund have materially complied with the requirements contained within the SIS Act and
associated regulations.
To that end, approved auditors must maintain documentation (i.e., audit working papers) which
explains the basis for their audit opinion in relation to the financial and SIS compliance audit of
the fund. As mentioned earlier, audit working papers should be sufficient to allow a peer with no
previous involvement with the fund to obtain an insight into the work undertaken and the basis for
the audit opinion.
As a consequence, an approved auditor needs to demonstrate the following competencies when
issuing an audit opinion (whether qualified or not) in relation to the financial and SIS compliance
audit of an SMSF:
•
An understanding of the ATO’s new mandatory and voluntary reporting requirements for any
breaches an SMSF may have committed during an income year. To that end, approved
auditors must have a detailed understanding of the new seven tests which must be
considered when assessing whether a breach by the fund must be recorded on an Auditor
Contravention Report (‘ACR’). Further guidance on the new seven test format can be found
in the ATO’s publication titled ‘Completing the auditor/actuary contravention report’;
•
An understanding on which breaches an approved auditor should consider recording in an
ACR where the breach does not fail one of the seven tests referred to above;
•
A detailed understanding of the information requirements which are now contained in the
ATO’s ‘approved form’ for the new audit report. At a minimum, approved auditors must
ensure their audit report includes all information and wording which is now included in the
ATO’s new approved form audit report;
•
A clear understanding that all breaches of the SIS Act and its regulations must be reported to
the trustees and this normally occurs in the management letter. Trustees are then given a
reasonable time to rectify the breaches identified by the auditor.
That is, an auditor must report all breaches to the trustees of the SMSF and this normally
occurs in the management letter;
•
An understanding of the 2008 Self Managed Superannuation Annual Return (‘2008 SMSF
return’) disclosure requirements associated with auditing the fund. More specifically,
approved auditors must ensure that all labels on the 2008 SMSF return which relate to the
audit of the fund (e.g., Item 6 Label A, which asks whether the audit report was qualified)
have been correctly prepared;
•
Use their professional judgement and identify any material misstatements within the financial
statements which may result in a qualified audit opinion;
•
Interpret the information gathered as part of the financial audit of the SMSF to ensure they
form an appropriate audit opinion in relation to the relevant fund; and
•
Apply the appropriate audit sampling and testing techniques (as specified within the
Australian Auditing Standards) which are designed to ensure the auditor does not form an
inappropriate audit opinion on the financial position of the fund.
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Competency standards for Fellows of the NTAA auditing SMSFs
Minimum Continuing Professional Development
(“CPD”) requirements
Within the context of the NTAA, it is only Fellows who are eligible to audit SMSFs as approved
auditors. Refer to SIS Regulation 1.04(2).
Eligibility criteria to become an NTAA Fellow
An NTAA member is eligible to become a Fellow (and thus audit SMSFs as an approved auditor)
where they satisfy certain educational and CPD requirements (as per the NTAA’s by-laws). In
broad terms, an NTAA member is eligible to become a Fellow where they satisfy one of the
following requirements (as contained in paragraphs 7.1(a) and (b) of the Constitution of the
NTAA):
•
•
They are a current member of an Australian accounting body designated in the by-laws (e.g.,
CPA Australia and Institute of Chartered Accountants) as approved by the Council who holds
any additional qualifications as specified by the by-laws; or
A person who has in the three years preceding the application:
•
practised as a principal in a public practice; or
•
worked in a public practice as an employee or has been supervised by a person, who
during the relevant period, was qualified to be a Fellow and who verifies that the
applicant worked on a broad range of income tax returns, income tax advice and other
public practice accounting functions during that three year period;
and either –
•
is the holder of a recognised degree or diploma from a recognised tertiary education
institution; or
•
is the holder of a degree or diploma (other than a recognised degree or diploma) from a
tertiary education institution and in the course of that degree or diploma and/or in the
course of subsequent post-graduate studies has successfully completed a major (being
3 years of full time study or 6 years part time study) in accountancy or the equivalent of
such a major and has successfully completed studies in taxation as prescribed by the
by-laws at any time, or has had considerable experience in the preparation of income
tax returns and the provision of income tax advice.
Furthermore, a Fellow who wants to audit SMSFs as an approved auditor will generally also need
to satisfy the additional requirement of completing a unit in auditing (relative to their qualification),
adopt the Australian Auditing Standards and satisfy the competency standards.
On-going CPD requirements for Fellows of the NTAA
A Fellow of the NTAA is then required to undertake on-going CPD and personal development as
stipulated within the NTAA’s Constitution and by-laws.
In general terms, Fellows of the NTAA who hold a current practising certificate are required to
undertake and complete a minimum of 30 hours (being 15 hours of structured training and 15
hours of unstructured training) of continuing education or professional development in each
calendar year. Refer to paragraph 9 of the by-laws of the NTAA.
Importantly, Fellows of the NTAA are entitled to take into account a combination of formal and
informal programmes when assessing whether they have satisfied their annual CPD
requirements. By way of example, under paragraph 9(l) of the NTAA by-laws, a Fellow is entitled
to a credit of 1 hour for every 1,000 words of an article researched and prepared by a Fellow and
published in taxation or accounting publications or such other publication as the Council may
approve to a maximum of 5 hours.
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Competency standards for Fellows of the NTAA auditing SMSFs
Additional CPD requirements for Fellows who act as
approved auditors
The NTAA Board’s additional CPD requirements should apply for any Fellows who wish to use
this designation to audits SMSFs.
In particular, the NTAA Board has taken the view that additional CPD requirements should be
devised for Fellows who audit SMSFs, being an approved auditor. These additional guidelines
only apply to Fellows who audit SMSFs (i.e., they act as an approved auditor) and have been
developed in conjunction with the ATO. The guidelines have been developed to ensure that
NTAA Fellows continue to demonstrate the requisite level of skill and judgement necessary to
undertake an appropriate audit of an SMSF.
As a consequence, Fellows of the NTAA who audit SMSFs (i.e., they are approved auditors) must
undertake a minimum of 20 hours CPD over a three-year period, which must include the
following categories:
•
16 hours of superannuation-based training – this training does not have to deal
exclusively with auditing SMSFs and may represent training which includes an update of
superannuation developments along with audit-based issues; and
•
4 hours of SIS compliance and financial audit-based SMSF training - this training will
need to entail the process of undertaking a financial audit of an SMSF and also consider the
SIS compliance aspect of auditing an SMSF. Ideally, the training will consider issues ranging
from producing the audit file, audit working papers and consider the basis for forming an audit
opinion.
It should be noted that the 20 hour CPD requirements mentioned above are not in addition to
the 30 hours of annual CPD training Fellows must complete.
The SIS compliance and financial audit-based training should be structured and specialised to
deal with audit-based issues pertaining to SMSFs. In other words, courses which examine broad
issues associated with financial accounting and auditing will generally not be regarded as specific
enough for the purposes of the above requirements.
Naturally, the above represent minimum requirements and Fellows of the NTAA are also
expected to independently update their knowledge as developments arise in superannuation.
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National Tax & Accountants’ Association Ltd.
Competency standards for Fellows of the NTAA auditing SMSFs
Disciplinary procedures for Fellows of the NTAA
Under Paragraph 15.6 of the NTAA’s Constitution, a member’s practising certificate (i.e., their
Fellowship) may be suspended or cancelled at any time in accordance with the discipline and
misconduct measures contained in Paragraph 22 of the NTAA Constitution.
In essence, Paragraph 22 of the NTAA Constitution empowers the Ethics Committee to hear and
conduct enquiries for any charge laid against a member pursuant to the Constitution to determine
whether the member has been guilty of ‘misconduct’. In broad terms, a member will be guilty of
misconduct where they have not abided by the Constitution and by-laws, acted in a manner that
may be regarded as dishonourable, is negligent in their professional duties or fails to comply with
professional standards adopted by the Council.
Following on from the above, it is therefore submitted that the Ethics Committee would be
permitted to take action against a Fellow (i.e., approved auditor) who failed to conduct an audit of
an SMSF in accordance with the Australian Auditing Standards. In particular, under Paragraph
18(g) and Rule 11 of the by-laws, a Fellow of the NTAA would be regarded as failing to comply
with the professional standards adopted by the Council (and thus guilty of misconduct) where an
audit of an SMSF was not conducted in accordance with the Australian Auditing Standards and
competency standards.
Some of the remedies available to the Ethics Committee in the event that a member is found
guilty of misconduct include the following:
•
the member may be expelled as a member of the NTAA;
•
the membership of the member may be suspended for a period not exceeding 6 months;
•
the Committee can prohibit any use by the member of any designation which the member is
permitted to use pursuant to the Constitution;
•
the Committee can give a direction that the member undertake a course of continuing
education or professional development prescribed by the Committee; and
•
in addition, to the other actions available to the Committee, they may order the member pay
the costs of the Association in relation to laying and hearing the charge.
As such, should an approved auditor be found to guilty of misconduct then the Ethics Committee
have a number of remedies available (refer above).
National Tax & Accountants’ Association Ltd.
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