Most trustees assume the audit is just another thing their accountant does, like the tax return. It is not, and the reason is worth understanding because it is one of the few genuine protections you have.
Every SMSF must be audited each year by an approved SMSF auditor, who is a person registered with ASIC and holding a current SMSF auditor number. That much most people know.
What fewer trustees know is that under APES 110, the Code of Ethics for Professional Accountants, an auditor generally cannot audit a fund where the auditor, their staff, or their firm prepared the financial statements. There is a narrow exception where the preparation work was purely routine or mechanical and the trustees made all the judgement calls, but in practice that exception is very hard to rely on. If your accountant is exercising professional judgement in preparing the accounts, and they usually are, the exception is gone.
The logic is simple enough. An auditor is supposed to be willing to qualify the report or write an adverse finding. It is difficult to do that about your own work.
This is not a technicality
ASIC has been acting on it. In the first half of the 2025-26 financial year, ASIC flagged increased scrutiny on in-house audits specifically, and two of the four auditors it disqualified in that period were disqualified because they continued auditing SMSFs whose financial statements were prepared by staff in their own firm. In both cases ASIC had already imposed extra conditions on their registration to address exactly that issue.
Across the full 2025-26 financial year, ASIC made 64 administrative decisions about SMSF auditors, resulting in eight disqualifications, three suspensions, additional conditions on ten, and 43 cancelled registrations. That is a substantial increase on the previous year. The ATO also completed close to 200 reviews and audits of SMSF auditors during that period and referred 39 of them to ASIC.
What it means for how your fund should be set up
There are two clean ways to run this.
Your accountant prepares the accounts and an independent auditor, outside their firm, does the audit. This is how most firms operate now.
Or the firm does the audit and someone else does the accounts.
What should make you uncomfortable is a provider who is vague about which of these applies to your fund, or who has an audit division down the corridor and a general assurance that independence is managed. Team separation alone is not enough under APES 110.
Two things you can check yourself
Ask who audits your fund and what their SMSF auditor number is. You are entitled to know and the answer should be immediate.
Then look them up. ASIC maintains a public professional registers search covering approved SMSF auditors, and it will show you whether the registration is current, suspended, or subject to conditions. The same register covers banned and disqualified persons. It takes about two minutes.
If your provider cannot tell you who audits your fund, that is not a small thing. It is the one independent check on everything else they have done.