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Auditor referral threshold test troubling: SMSFA

The SMSF Association is concerned that the introduction of a 20% threshold for auditor referral fees does not address at what point in time the threshold test must be considered or applied.

The Accounting Professional & Ethical Standards Board introduced draft amendments to the APES 110 Code of Ethics for accountants, outlining the threshold.

The SMSFA believes if there is a threshold test to apply, it should be 30% in respect of total fees from multiple audit clients referred from one source and also introduce a two-year period in which auditors must consider audit fees from a single referral source.

"We are concerned that an auditor may take genuine steps to comply with the standards, yet still fall foul of these provisions if a regulator or a court were to apply the threshold at a different point in time," SMSF Association chief executive John Maroney said.

"An auditor may, in good faith, undertake an assessment of their likely fee income and sources for the year at the start of a new financial year. Although fees, including referral fees, for the previous year may assist in a budgeting or planning process, there are no guarantees that the same level of work will be received the following year."

The association acknowledged the external factors that impact the referral of audits to auditors and the association's members are concerned that introducing a codified threshold will become a hard test requiring them to decline some, if not all the audits referred to them from a particular referral source.

"The concern is that the regulator's intent for these proposed changes, and industry's interpretation of them, may differ to any further interpretive guidance contained in a future version of the Independence Guide. Future guidance may result in any thresholds that are codified, evolving into a hard threshold test," Maroney said.

Read more: SMSF AssociationSMSFAJohn Maroney