Some of the Cooper review's recommendations have left those in the accounting industry scratching their heads, rather baffled at what some particular measures are aiming to achieve.
A resounding concern with the accounting profession is that some potential reform is unnecessary and doesn't seek to improve or simplify the current system.
Instead, there is a widespread belief among industry stakeholders that particular measures will only serve to duplicate rigorous regimes already put in place by the three professional accounting bodies.
Cooper's recommendation that the regulation of self-managed superannuation fund (SMSF) auditor activity be improved by giving ASIC the power to determine the qualifications to be registered, set competency standards and develop and apply a penalty regime, with the standards to be policed by the Australian Tax Office (ATO), is one such proposal that has been viewed as impractical for a number of reasons.
Let's start with the fact that a vast majority of SMSF practitioners are already members of the three professional accounting bodies - the Institute of Chartered Accountants in Australia, CPA Australia and National Institute of Accountants (NIA).
Now considering 95 per cent of approved SMSF auditors are members of these three accounting bodies, they are in fact already obliged to abide by professional, ethical, auditing and competency standards stipulated by each of these separate organisations.
So it's not surprising the three bodies are not only confused by Cooper's recommendation, but they're also forthright that this is reform they're not in support of, only because it is doubling up on a regimen that they've already imposed on their members.
"The most concern to us is the proliferation of registration requirements for accountants," NIA member integrity manager Reece Agland says.
"We wouldn't like to see accountants, well at least our members, have to be registered with yet another body in relation to setting up an SMSF."
Similarly, CPA Australia superannuation policy senior adviser Michael Davison argues having a separate registration body is unreasonable.
"The unnecessary expense and additional compliance of having a separate body is ultimately going to reduce the pool of auditors and push costs up for fund trustees when you've already got a well run regime in place," Davison says.
"What we've suggested to Cooper and the government is that either the 5 per cent of auditors who aren't members of the professional bodies adopt the same standards we have or restrict audit to the members of the three bodies."
The Institute of Chartered Accountants shares this view, believing it would be much more of a logical outcome for the industry.
"If 95 per cent of SMSF auditors are applying their quality review and their disciplinary action against the same competencies and the same standards, then why are we bringing in this whole new regime for essentially 5 per cent of the auditors? It's just overkill," the institute's head of superannuation, Liz Westover, says.
Agland agrees, noting it is indeed this diminutive percentage of unsupervised SMSF auditors who are making it difficult for the rest of the industry.
"We've already actually set up a lot of professional requirements for our members in this area, so our concern is that we've all been put in this one basket," he says.
Accounting firms, such as HLB Mann Judd, are similarly perplexed by Cooper's recommendation. "I just don't really see what the Cooper review is trying to achieve with that, I just don't think it's the right way to go about it by calling ASIC into register people and so forth. It's not that helpful," HLB Mann Judd head of wealth management Michael Hutton says.
"It just strikes me as a pretty big stick for relatively small family investment vehicles that we're talking about; it's not like we're dealing with publicly listed companies."
While Hutton adds he'd much prefer the ATO to be the sole regulator for accountants and auditors rather than handing some of this power over to the corporate watchdog, he's not alone.
"The ATO does a good job, so the idea of establishing another body or using an existing body like ASIC is unnecessary duplication. I fail to understand where the demarcation would be between ASIC and the ATO?" Davison says.
"Where does registration and setting the standards stop and actually regulating the auditors to make sure they're abiding by those requirements?
"So do we end up with ASIC just regulating how you abide by your standards and then you have the ATO regulating auditors as to how they're policing the super system? We don't quite understand how it would work.
"Obviously the recommendation needs to be more detailed, but we think the cost and complexity outweigh any benefits that might be there. We really need to be going the other way; things are complex enough already."
Westover says there are other more practical measures that could be considered and implemented to make the system more robust, such as forcing all auditors to report directly to the ATO.
"Then in fact you're going to have a much more timely, accurate database of approved auditors and then we would ask the ATO to make that list available to SMSF trustees and also to the professional associations," she says.
"So that way we can have a better understanding of who's holding themselves out to be an auditor and better checks and balances to ensure they're meeting their competency requirements. But there were no mention of those sorts of activities in the Cooper review."
Furthermore, she highlights that the ATO already has an electronic superannuation audit tool in place, which is an online program for auditor's to report audit contraventions directly to the ATO.
"So there's some of these systems already in place that can just be enhanced and improved or modified to allow auditors to report directly to the ATO all audit activities," she says.
"That one ticks so many more boxes because we can make sure that funds are being audited before the annual return's been lodged, again another legal requirement, and we can make sure that whoever the auditor is, is reporting their correct details directly to the ATO."
Auditing independence is another of Cooper's recommendations that in some respects ignores the autonomy standards the three accounting bodies and audit firms already have in place.
"I think what's missing from the Cooper report is a real understanding of the way the audit function already works," Westover observes.
The proposal, which if legislated, would not only restrict the engagements that accounting firms could have as auditors whereby the accountant and firm would not be able to audit the SMSF, but ultimately drive up costs for trustees.
Once again, the institute, CPA and NIA all echo a similar sentiment in that there is already a robust system in place regarding auditing independence and professional standards that cover a vast majority of auditors in the market. "At the moment there are quite broad and rigorous professional independence requirements in place for all audit and insurance engagements across the board, whether you're doing big or small corporates, sporting clubs, SMSFs," Davison says.
"Firms have structures and polices in place to avoid that conflict, so to actually try and restrict it for one area of audit being SMSFs, you're creating two regimes."
More importantly, he argues what this potential legislation will do is restrict what audit firms can do, which will consequently force many to conduct an organisational reshuffle.
"So audit firms are going to have to restructure or you'll see accounting firms getting out of audit, so ultimately it's going to reduce the pool of auditors," he says.
"There are already questions about access to auditors when you've got 400,000-plus SMSFs, and ultimately you're going to drive costs up for the trustees. Not only are clients going to be out of pocket, they're not going to be happy about it."
Westover concurs, acknowledging that the audit independence issue has significant implications for the industry.
"We don't need to have another system set up that's just for SMSF auditors when the robust system is already in place; it's already a well-developed regime so why come over the top of it with something else again?" she says.
"That's just going to add complexity and a lot more cost to the industry that presumably will be passed onto consumers and that's not what we want; it's all about adequate retirement savings."
Agland agrees, noting the NIA considers Cooper's recommendation as actually ignoring what the accounting profession has already put in place in relation to auditor independence.
"It is a major concern and I think people might see it as us trying to protect our turf, but we don't see it that way," he affirms.
"Our view is that if it's a multiple practice and one partner is responsible for the accounts and another partner is responsible for the audit, then you don't get that [independence] problem. So from our perspective we don't think there is a drastic need to separate it."
Besides, Agland says the reality is a lot of practitioners are setting themselves up as specialist SMSF auditors anyway and a lot of firms are referring their SMSF audit work to these specialists.
"So in another sense we're seeing the market is already addressing this issue, so by adopting a very strict legal interpretation, you're in effect manipulating what the market is already doing," he says.
Hutton says the auditing independence proposal does have more of an impact on HLB Mann Judd.
"I don't see why that these particular entities being SMSFs should have a mandated independence requirement over and above what's already in place," he says.
"I don't know that it would improve the quality of the audits and I think it would add to the cost for clients, and it's also an extra step in the process that adds time as well to getting these funds completed and signed off each year."
While Cooper's report included statistics that indicated where an external auditor is used it can be cheaper, Hutton argues this is not always the case. "Those stats are largely based around the big ministry of platforms where they do get auditors to come in and they're getting presented with exactly the same file for every fund and they're doing thousands of audits in one hit," he says.
"That will keep the costs down of those external audits, but where they're individualised SMSFs, which is what a lot of them are, certainly the ones we deal with are, I think getting an external firm to audit it could add to the cost and the time delay."
The potential reform does not seem to cause too much concern for financial planning dealer groups, such as Count Financial and Lonsdale Financial Services, which are also made up of accountants.
"With our strong network, there is significant scope for our franchisees to utilise the services of other Count franchisees if required to facilitate administration and audit of SMSFs," Count Financial chief executive Andrew Gale says.
"If required, we will look to actively work with our network to facilitate this transaction transfer."
Meanwhile, Lonsdale chief executive Mario Modica says: "I think there would be a few advisers in our network that are relieved that they've got a Chinese wall in place that ensures that the audit is quite independent of the advice."
Cooper's recommendation for the removal of the accountants' exemption will mean accountants could be captured by Australian financial services licence (AFSL) requirements, and need to be licensed to provide advice when establishing an SMSF.
The three accounting bodies are not opposed to the removal of this exemption, partly because it's always been problematic in that accountants providing SMSF advice to their clients are unable to make comparisons with alternative superannuation products.
"The big issue we have is people go and talk to accountants at tax time and ask for basic advice and can't get it . it's always been a flaw in the law," Davison says.
However, some accountants have previously addressed this hurdle with a financial planning solution where they've either obtained an AFSL, brought a planner into their practice or have set up some sort of joint venture or referral agreement with a financial planner.
Agland points out the problem with the current system and why a lot of accountants aren't licensed for financial advice is that it's quite expensive for them to do this.
"There are a few of the financial planning houses out there that say they're willing to license accountants, but it's about $20,000 a year, and if you're not selling product, you're not going to recoup that money," he says.
So while the institute, CPA and NIA are in support of the removal of the exemption, they are in fact calling for an appropriate alternative in its place so accountants are able to provide more broad, non-product advice to their clients.
"The option for accountants to provide non-product advice fills a pretty big gap. It will catch all the incidental and basic issues," Davison notes.
Westover shares this sentiment. "The overriding thing you've got to remember is that there's a really important role for accountants in the provision of quality financial advice," she says.
"When you consider that 72 per cent of Australians use a tax agent, that's a pretty significant touch point on an annual basis for a lot of Australians to be able to get some simple, quality financial advice.
"So a suitable replacement is needed so accountants can have a decent conversation with their clients about all types of superannuation, not just SMSFs . that way people are accessing and getting some really good information to move forward." The recommendation will not cause too much of an impact on HLB Mann Judd, Hutton says.
"For us it doesn't make that much difference because the people that would normally recommend the SMSFs have those appropriate licences anyway," he says.
"In terms of the industry though, I've always looked at SMSFs as being purely an investment and tax structure so I think it has been appropriate for accountants to advise on that, as they do on family trusts and investment companies and so forth."
While Hutton says it does make sense to have some sort of a licensing requirement in place, he argues that it should not be a full AFSL.
"I think it would be satisfactory if it was some sort of a special focus licence whereby accountants need to do some sort of qualification around superannuation to understand the alternatives that are available," he says.
"That would be satisfactory rather than saying they have to have a full AFSL. It is really an investment and tax structure issue; I don't really subscribe to it being a financial product."
Meanwhile, the removal of the accountant exemption does not pose too much threat to Lonsdale's adviser base.
"I think it creates a bit of concern for not so much our network but for accountants generally who, if it goes through, will need to be licensed somewhere," Modica says.
"We've been talking about this for probably five years now and we've got a number of groups who are aligned to us who just give strategic SMSF advice and that's all they're licensed to do.
"For example, even today we got a phone call from someone saying they want to join Lonsdale because they want to be able to give advice on SMSFs. So it's starting to get a bit of traction."
Similarly, Count Financial sees the potential reform as an opportunity to provide financial planning licensing and infrastructure support to this group that would consequently come within the licensing regime.
"We believe we are ideally positioned to be offering these services and have already received numerous queries regarding this from both within and external to our current network," Gale says.
"Depending on the detail of the eventual legislation regarding licensing, we will look to actively position ourselves to service this expanding financial advisory network."
