I was deeming as an audit file being, you walk through the door and now a file is the whole office. So my work file at that point was the whole office, not just that one document.

5. As such, at first, he did not accept that such a practice was in breach of ASA 230. However, when pressed further on the issue of whether an independent external auditor with no connection to the audit could have picked up his file and understood matters, he conceded that in that context he was in breach.

Compliance with auditing and assurance standards - obtain sufficient audit evidence as required by ASA 500

1. The Applicant submits that Mr Sidhu's Affidavit provides evidence that he had all the relevant information he needed as an experienced SMSF auditor to perform his audit of the three Funds consistent with requirements in GS 009.[9]
2. The Respondent directed me to the guidance in GS 009 which provides:

ASA 500 Audit Evidence requires the auditor to design and perform audit procedures that are appropriate in the circumstances of the engagement, for the purpose of obtaining sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the audit opinion. It requires the auditor to consider the relevance and reliability of the information to be used as audit evidence which includes the documentation of their testing and how the results may impact the audit opinion.

3. The Respondent submits that 'sufficiency' in this context is the measure of the quantity of the audit evidence and 'appropriateness' is the measure of its quality.[10] The Respondent further submits in considering what amounts to reliable audit reference should relevantly be made to ASA 500 which favours evidence obtained from independent and direct sources over evidence obtained indirectly or by inference.
4. Below I consider Mr Sidhu's compliance with the audit documentation requirements in ASA 230 and audit evidence requirements in ASA 500 in relation to the three Funds.

1. In relation to the R Fund, ASIC submits that Mr Sidhu failed to prepare sufficient documentation as required by ASA 230 in relation to:

2. ASIC also submit that Mr Sidhu failed to obtain sufficient audit evidence as required by ASA 500 to support:

(b) ownership of commercial property and charges over the assets; > > (c) the market value of the Fund's commercial property; and > > (d) whether the Fund's bank loans were limited recourse borrowing arrangements (LRBA).

1. On the issue of the audit file submitted to the ATO not containing signed trustee declarations in relation to the R Fund, Mr Sidhu's evidence was that he understood the relevant obligation and that the declaration was not in the audit file because it was in the trust register.
2. The Respondent submits in its written closing submissions that not only is there a requirement under the SIS Act for the auditor to obtain and cite the relevant trustee declarations to ensure they have been made and are in the correct form, but also to ensure they are retained.[11]
3. When asked during cross-examination why he has not provided the physical document to the ATO or ASIC in these proceedings for the other trustee, Mr Sidhu's evidence was 'I should have done, but I did not'. Mr Sidhu's evidence was also that they now use a system that allows auditors to have access to all documents to 'go in and check', but back then it was different because they had the trust's register which contained the physical document. Mr Sidhu's evidence was that the declaration was in the trust register because that is where it stays.[12] Mr Sidhu's evidence was also that he did not put in on the audit file because back then everything was kept 'in house', i.e. on the trust register.[13]
4. Mr Sidhu's evidence also was that he provided the documents afterward but was advised by ASIC that, for this trustee, no more documents were going to be accepted.[14] His evidence was that he would have also sighted the trustee declarations during the audit of the R Fund.[15]
5. I consider Mr Sidhu to be in the main a credible witness. He attempted to answer the questions put to him in an honest way, although some of his responses lacked clarity and at times were diffuse and circuitous.
6. On this issue, I accept Mr Sidhu's evidence. However, I also find there has been a failure to comply with ASA 230 in relation to audit documentation. Mr Sidhu's evidence displays that the files were kept in a manner that required prior knowledge or experience of the R Fund and the operation of International Professional Services (IPS) in order to understand, among other things, the audit conclusions, results and the procedures performed.

Ownership of commercial property and charges over the assets

1. On the issue of Mr Sidhu failing to obtain sufficient, appropriate evidence to establish ownership of property by the R Fund, Mr Sidhu's evidence given at the hearing was that the documents on file may not have been sufficient from the ATO's point of view, but from his they were.[16]
2. As stated in the Applicant's closing submissions, as cross-examination ensued Mr Sidhu ultimately accepted that he had failed to obtain sufficient evidence to establish ownership of the property and whether it was charged by doing a title search.[17] The Applicant's closing submissions highlighted this as a clear acknowledgement and acceptance of error by Mr Sidhu.[18]
3. I will consider Mr Sidhu's remorse when considering the appropriate sanction. My observations on this issue are that it displays that instead of seeking independent external evidence to verify matters, Mr Sidhu relied upon indirectly obtained evidence or evidence obtained in the past to confirm positions. He also relied on his knowledge of the client and the relationship his client had with his firm to be informed of changes like a charge being placed on a property. My observation also is that there was a reluctance to place the evidence that there was on the audit file if it was contained on another IPS file. As will come to light below this is a pattern of behaviour.

1. On the issue of Mr Sidhu failing to obtain sufficient, appropriate audit evidence that the R Fund Investment Property was recorded at market value in accordance with regulation 8.02B of the SIS Regulations, Mr Sidhu's evidence in the hearing was that it was the trustee's responsibility to ascertain market value, he would then review that value and go back to the trustee if he considered it not appropriate.[19]
2. I accept the Respondent's submission that it is the auditor's responsibility to obtain evidence that the valuation provided is reasonable and supportable, including by reference to current, independent and robust information.[20] I find there has been a failure to obtain sufficient, appropriate audit evidence in order to ensure compliance with regulation 8.02B of the SIS Regulations.

1. On the issue of Mr Sidhu failing to obtain sufficient, appropriate audit evidence to support whether the loans recorded in the R Fund were limited resource borrowing arrangements (LRBA), Mr Sidhu's evidence was, although the audit file provided to the ATO did not include a copy of the LRBA with the relevant bank, he did have them and didn't think that it was needed to be forwarded to the ATO.[21]
2. The evidence contained in Mr Sidhu's Affidavit and provided at the hearing displays his inadequacies in obtaining sufficient audit evidence:

(i) It was not on the audit file provided to the ATO because the document would have been in prior years' files; > > (ii) the LRBA was kept on a different file at IPS, he sighted it and saw no need to make a copy and put in on the audit file;[22] and > > (iii) he did not proactively check to see if changes had occurred, but instead relied on being notified or it being raised by the IPS accountant who did other work for the trustee.

3. Therefore, I accept the Respondent's submission that reliance on assumptions made only possible because of Mr Sidhu's familiarity with the Fund demonstrates a misunderstanding of his extent of his obligations as an SMSF auditor.[23]
4. As the Applicant's submission points out, the Respondent's criticisms with respect to the R Fund apply 'mutatis mutandis' to the C Fund and the O Fund.[24] Likewise, Mr Sidhu's evidence regarding those Funds largely follows his evidence concerning the R Fund.[25] The Applicant's counsel submits, therefore, that what is important about the C and O Fund is not the compliance issues themselves but Mr Sidhu's acknowledgement of fault, the taking of responsibility, expression of contrition and the commitment to do better in the future.[26]
5. Although I appreciate this may be the case, set out below are my brief conclusions as to compliance with auditing and assurance standards as required by section 128F SIS Act in relation to ASIC's concerns with these Funds.

1. In relation to the C Fund, ASIC submits that Mr Sidhu failed to prepare sufficient documentation as required by ASA 230 in relation to:
   • Fund's ownership of assets;
   • signed accounts and statements; and
   • the Fund's borrowings.
2. ASIC also submit that Mr Sidhu failed to obtain sufficient audit evidence as required by ASA 500 to support:

• the Fund's investment in an unlisted unit trust complied with in-house asset rules;
  • the rental income from the Fund's property was at arm's length;
  • trustees had a current investment strategy and given effect to it;
  • the market value of the Fund's properties; and
  • that the charges held over properties are allowable.

(a) Ownership of assets - after considering the evidence and the parties' submissions, I am satisfied there was a failure to obtain sufficient, appropriate audit evidence or prepare sufficient audit documentation regarding the Fund's ownership of an investment in the K Unit Trust. Although relevant documents may have been available to Mr Sidhu and reviewed by him, similar inadequacies as identified in relation to the R Fund outline above are also evident here. > > (b) Signed accounts and statements - after considering the evidence and the parties' submissions, I am satisfied there was a failure to obtain sufficient, appropriate audit evidence regarding the Fund's accounts and statements. Mr Sidhu's evidence was that signed financials were not on the audit file but on another file maintained by IPS; that 'we would have' viewed them, meaning IPS; that his 'junior' would have checked them; that the incorrect date of 2018 being contained on the 2019-2020 financial year statements was something his junior should have noticed but in any event he did not check.[27] > > (c) Borrowings - after considering the evidence and the parties' submissions, I am satisfied there was a failure to obtain sufficient, appropriate audit evidence regarding borrowing arrangements and whether or not the loan was compliant. Mr Sidhu's evidence was that the audit file should have contained a copy of the loan terms and a notation regarding the loan's compliance with section 67 of the SIS Act.[28] Mr Sidhu's evidence was that he was unable to provide a copy of the loan agreement to the ATO or ASIC because they were on the IPS client files that the client had taken.[29] He also said that as the client now had significant health concerns he had been hesitate to ask for them back.[30] > > (d) In-house assets - after considering the evidence and the parties' submissions, I am satisfied there was a failure to obtain sufficient, appropriate audit evidence in relation to the Fund's compliance with the in-house asset rules. Mr Sidhu's evidence was that he accepts there was nothing on file to demonstrate his conclusion that the Fund's unit holding in K Unit Trust and the loan unit trust made to the members predated the in-house asset rules.[31] > > (e) Investment held on an arms-length basis - after considering the evidence and the parties' submissions, I am satisfied there was a failure to obtain sufficient, appropriate audit evidence to support that the Fund's investment property was maintained on an arms-length basis. Mr Sidhu's evidence was that, because of the short-term nature of the leasing arrangement at the complex within which the property was situated and the personal circumstances of the trustees at the time, he assumed the property was not being used by related parties but obtained no evidence to support that assumption.[32] > > (f) Investment strategy - after considering the evidence and the parties' submissions, I am satisfied there was a failure to obtain or adequately document the Fund's compliance with the requirement in regulation 4.09 of the SIS Regulations that trustees have an investment strategy. Mr Sidhu's evidence was not to deny this but to provide a reason for its omission, being that the trustees were going through a divorce, and so they were selling down all the assets.[33] As the Respondent submits, that is an investment strategy that could have been recorded.[34] > > (g) Market valuation - after considering the evidence and the parties' submissions, I am satisfied there was a failure to obtain sufficient, appropriate audit evidence to support that the Fund's investment properties were recorded at market value in accordance with regulation 8.02B of the SIS Regulations. Mr Sidhu's evidence displayed his knowledge of the history of the property's value, despite this, he did not document that knowledge but relied on: > > > (i) an appraisal letter from a real estate agent; > > > > (i) representations from the trustees that they believed the value had not changed; and > > > > (ii) a search of the property's sale history which included its listing price. > > Mr Sidhu conceded that he should have done more as he understood and appreciated the importance of market values.[35] > > (h) Charges - after considering the evidence and the parties' submissions, I am satisfied there was a failure to obtain sufficient, appropriate audit evidence to demonstrate compliance with regulations 13.15 and 13.15A of the SIS regulations. Like in the case of the R Fund on this issue, Mr Sidhu's evidence was that he accepted that he did not, but should have, conducted a title search.[36]

1. In relation to the O Fund, ASIC submits that Mr Sidhu failed to prepare sufficient documentation as required by ASA 230 in relation to:
   • the ownership of the Fund's bank account; and
   • signed financial statements.

1. ASIC also submits that Mr Sidhu failed to obtain sufficient audit evidence as required by ASA 500 to support:
   • the Fund's borrowing agreement was at arm's length;
   • the Fund's borrowing from a fund member complied with borrowing exceptions;
   • the rental income from the Fund's properties was at arm's length;
   • the market value of the Fund's properties; and
   • that there was no charge held over the Fund's commercial property.
2. The Applicant submits similarly in relation to this Fund as for the C Fund, pointing to Mr Sidhu's acknowledgements of acceptance, regret and shortcomings.
3. Set out below, are my conclusions as to compliance with auditing and assurance standards as required by section 128F of the SIS Act in relation to ASIC's concerns with this Fund:

(a) Ownership of Fund's bank account - after considering the evidence and the parties' submissions, I am satisfied there was a failure to obtain sufficient, appropriate audit evidence to support the Fund's ownership of a specific bank account. Mr Sidhu's evidence was that he accepts there was a deficiency in his recordkeeping practices of recording the checks and verification he undertook of the bank account using his online access to the particular account.[37] > > (b) Signed financial statements - after considering the evidence and the parties' submissions, I am satisfied there was a failure to obtain sufficient, appropriate audit evidence regarding the Fund's financial statements. Mr Sidhu's evidence was that there were no financial statements on the audit file, however, a copy of the financial statements were 'in our system'.[38] > > (c) Borrowings - after considering the evidence and the parties' submissions, I am satisfied there was a failure to obtain sufficient, appropriate audit evidence regarding the borrowing arrangement between the Fund and a Fund member to establish whether it complied with borrowing exceptions. The evidence contained in Mr Sidhu's Affidavit and provided at the hearing displays his inadequacies in obtaining sufficient audit evidence to show that the asset was held beneficially by the Fund in trust: > > > (i) there was no copy or evidence on the audit file about the holding trust arrangement and whether it was consistent with the requirements for a compliant LRBA; > > > > (ii) there was no evidence on the audit file of a registered mortgage over the property; > > > > (iii) there was no evidence on the audit file of the repayment of both principal and interest and whether the repayments were made monthly; and > > > > (iv) the loan agreement document provided to the ATO was reproduced, backdated and re-executed as the original was not returned or was misplaced. > > (d) Arm's length - after considering the evidence and the parties' submissions, I am satisfied there was a failure to obtain sufficient, appropriate audit evidence to show that the Fund's properties were maintained on an arm-length basis. Mr Sidhu's evidence was that the audit file did not contain a copy of the rental agreements or any evidence that the rental was at market rates, although he had communicated with the trustee on these issues that communication was not on file.[39] Further in relation to one of the properties, Mr Sidhu's evidence was that he did not have a copy of the lease agreement on the audit file but was 'pretty sure' he knew who the tenant was.[40] In relation to the other property, there was no evidence on the audit file as to the reasons for the lack of rental being earned from the property for the 2020 income year which was because floods and COVID-19 made it unrentable.[41] > > (e) Market valuation - after considering the evidence and the parties' submissions, I am satisfied there was a failure to obtain sufficient, appropriate audit evidence to support that the Fund's investment properties were recorded at market value in accordance with regulation 8.02B of the SIS Regulations. Mr Sidhu's evidence was also that he relied on conversations with the trustee and his property knowledge of the area for changes in the value of the properties and conceded that he could have done more.[42] > > (f) Charge over asset of Fund - after considering the evidence and the parties' submissions, I am satisfied there was a failure to obtain sufficient, appropriate audit evidence about the existence of any charges over the Fund's assets. Mr Sidhu's evidence was that he relied on his knowledge of his client's affairs and, knowing that nothing had changed, he did not do a title search.[43]

Compliance with auditor independence requirements in APES 110

1. On the issue of independence, the Applicant submits that the Respondent is holding him to a higher standard than the Court held Mr Gilliland to in Australian Securities and Investments Commission v Gilliland [2022] FCA 1421.
2. The Applicant's evidence was that the ATO did not require compliance with APES 110 until after 1 July 2021.[44] The Applicant's evidence was that until that time, APES 110 did not restrict SMSF auditors from auditing clients of their own practice and that all of the audits were completed before 1 July 2021.[45]
3. The evidence that was admitted supporting this position was a range of documents that were produced by the ATO regarding SMSF auditors and auditor independence after 1 July 2021.
4. The Applicant further takes issue with the accuracy and appropriateness of the Respondent's assertion made during the hearing that the ATO does not make the rules and requirements given the co-regulatory nature of the regime[46] and its own statement that it is responsible for monitoring compliance with the independence requirements set out in the code.[47]

1. The Respondent submits that independence threats were created by reason of:

(a) The Applicant's longstanding association with his audit clients which in respect of the C Fund was a period of 9 years; the R Fund was for a period of 12 years; and for the O Fund, Mr Sidhu noted that it would have been a long time.[48] > > (b) The fact that his firm IPS performed an extensive range of non-audit work for these clients that went beyond services of a routine or mechanical nature.[49]

2. The Respondent submits that the audit file provided for each of the Funds do not display that the threats to independence were assessed and consideration given to whether safeguards were necessary.[50]
3. Further, the Respondent submits that the audit deficiencies in relation to each of the Funds often relate to the Applicant failing to obtain sufficient audit evidence, because in many instances the Applicant relied on representations by the trustees of the in-house accountants.[51]
4. On the issue of compliance with APES 110 independence requirements prior to 1 July 2021, the Respondent submits that, whilst it is true that in September 2021 the ATO released a statement noting that it expected SMSF auditors to comply with their obligations under APES 110 and not to undertake significant in-house work for audit clients, that did not mean that it was permissible before that date.[52] The Respondent submits that those requirements were mandated before that date.
5. In that regard, a previous version of APES 110 Code of Ethics for Professional Accountants issued in December 2010, which came into effect on 1 July 2011, contains similar but not identical provisions dealing with threats to independence including:

(a) Section 290.7 which requires members to identify threats to independence; evaluate those threats and address the threats by eliminating them or reducing them to an acceptable level. It also requires members to decline or terminate the audit engagement if threats cannot be reduced to an acceptable level. > > (b) Section 290.150 explains how familiarity and self-interest threats might be created as a result of a member of an audit team having a long association with the audit client. > > (c) Sections 290.164 to 290.167 explain how management responsibility of an entity which includes taking responsibility for the preparation of financial statements can create threats. Section 290.165 states if a firm were to assume management responsibilities for an audit client the threats created would be 'so significant that no safeguards could reduce the threats to an acceptable level'. Section 290.168 states providing an audit client with accounting and bookkeeping services, 'such as preparing accounting records or Financial Statements, creates a self-review threat when the Firm subsequently audits the Financial Statements'.

6. As the ATO's educational materials explain the code underwent a significant restructuring in 2021. The statement from the ATO about its compliance approach contains the following:[53]

The restructured Code which commenced with effect from 1 January 2020 and the Independence Guide (May 2020) make it clear that SMSF auditors who are conducting in-house audits are at risk of not complying with the Code... > > Our previous transitional educative approach to compliance with these standards has ended. We expect all firms (and network firms) that have previously conducted in-house audits to have already restructured to meet the independence requirements for all audits from 1 July 2021.

7. The PowerPoint presentation from a Webinar also explains that, during the 2020-21 income year, the ATO took a transitional approach to compliance by educating and helping auditors meet their obligations.[54]
8. The Respondent directs the Tribunal to comments made by Deputy President McCabe in Townshend and Australian Securities and Investments Commission (Townshend)[55] that the 'auditor independence requirements merely articulate what is inherent in the role of an auditor'. I can see how the ATO's educative material in its attempt to communicate the significance of the revision made to APES 110 and the Independence Guide may have given the false impression that the requirements were something 'new'. However, I can also see that the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour essentially remained the same.[56] Also remaining essentially the same is the conceptual framework which require auditors to identify threats to compliance with the fundamental principles; evaluate the significance of those threats and apply safeguards to eliminate or reduce those threats to an acceptable level.[57] Regardless of the ATO approach to compliance, Mr Sidhu had a duty imposed on him under the SIS regime to comply with those requirements - something which he failed to do or, if he did do, he failed to document.

What is the appropriate exercise of discretion?

1. It is essentially uncontested that the discretion in section 130F of the SIS Act to disqualify or suspend Mr Sidhu's registration as an approved SMSF auditor has been enlivened. The Applicant submits that a lifetime disqualification in these circumstances is unfair, disproportionate and inflexible. The Applicant has suggested the imposing of a suspension for a period of 12 months from the date of the hearing with enforceable undertakings as to continuing professional development and random auditing.[58]
2. In Townshend, DP McCabe outlined several factors that are relevant to the exercise of the discretion which I find also applicable to this case:

(a) The applicant's professional record and personal circumstances; > > (b) The seriousness of the conduct and the period over which it occurred; > > (c) Evidence of insight into the problem and the extend of cooperation with the regulator; > > (d) Specific and general deterrence; and > > (e) Any other mitigating factors.

3. In relation to factor (a), a professional character reference was given by Mr Grant Abbott, Director of LightYear Group Ltd, which stated that Mr Sidhu has a high standard of knowledge and that his approach to his professional responsibilities is both diligent and thorough.[59] The Respondent submits that Mr Abbott's evidence was of little probative value as, among other things, it does not comment on the competency and audit quality matters raised by ASIC.[60] As has been highlighted above, Mr Sidhu had a propensity for taking a lax and casual approach to audit procedure, documentation and record keeping. He has admitted himself that his practices have been far from perfect. Prior to these audits, his professional record appears to be unblemished. There was no evidence to suggest that cancellation would deprive Mr Sidhu of his livelihood, however, given the magnitude of the action, it is likely that financial and reputational consequences to his business could flow from such action. It appears that even before the taking of regulatory action there had been a decline in the number of SMSF audits conducted by Mr Sidhu with 119 conducted in 2018 financial year down to 29 in the 2021 Financial year.[61]
4. In relation to factor (b), the failure to carry out or perform adequately and properly the duties of an approved SMSF auditor and the failure to comply with auditor independence requirements in the SIS Act and Regulations are not only combined serious matters but are also serious matters in their own right.
5. The Applicant contends that the concern about independence is insufficient to justify disqualification. I disagree with this. As previous Tribunal decisions have concluded the failure to act independently or to act in a way that calls auditor independence into question is a very serious matter.[62] As was the case in Townshend, I do not consider Mr Sidhu had a wilful disregard of the independence requirements so I do not consider the conduct to be 'especially serious'.[63] I think Mr Sidhu had a misapprehension about the scope of the independence requirements to approved SMSF auditors which may have been contributed to by the ATO's educational materials. However, this does not excuse as stated above his failure to discharge the duty he had at that time to eliminate or reduce risks to independence.
6. In relation to factor (c), the Respondent submits that over the course of his evidence Mr Sidhu demonstrated a distinct lack of insight into his audit failing and downplayed the significance of a number of critical issues and attempted to excuse his conduct.[64] I do not entirely agree with this characterisation of Mr Sidhu's evidence. I do not consider that he downplayed the audit deficiencies. Several times he despondently acknowledged error and admitted that he could have done more.[65] I also do not find his evidence to be inconsistent, evasive or lacking credibility. His evidence displayed insight into the problem with his audit procedures. In his request for ASIC to review its decision, he acknowledged his previous approach to documenting his audit work fell well short of what a reasonably competent auditor would have on their file and expressed his determination to dramatically improve his approach.[66] But for the issue of the false declaration, there was no evidence to suggest that he was recalcitrant in his dealings with the regulator. As the Applicant's closing submission states Mr Sidhu presented as a truthful witness, readily conceded matters against his own interest and did not at any time denigrate the Respondent, the Respondent's counsel or the Tribunal.[67]
7. In relation to factor (d), regarding specific deterrence as stated above, Mr Sidhu displayed a degree of insight into his failings. Mr Sidhu gave evidence that he has changed his processes as a result of the ATO's intervention and no longer uses manual checklists.[68] However, the Respondent submits his continued lack of appreciation of some of the issues suggest that there can be little comfort that he would sufficiently change his ways if after a period of suspension he was to return to auditing SMSFs.[69] Given the nature of the audit errors, I am concerned that these errors could be found in previous audits conducted outside the three examples, despite the evidence provided that the Institute of Chartered Accountants conducted some type of review of the firm's file.[70] I am also concerned that they could be repeated in audits going forward.
8. Mr Sidhu also gave evidence that IPS no longer does audits if they are doing any other work for their SMSF clients.[71] Like in the case of Townshend, Ms Sidhu's problematic conduct in relation to the independence requirements was the product of ignorance over the application of the auditor independence requirements and whatever doubts he had about the requirements in the past have undoubtedly been resolved by his experience with the regulators.[72] I do not consider that a disqualification decision is necessary to deter him from engaging in future conduct in contravention of the requirement. In any event, as pointed out in Townshend, this is academic because Mr Sidhu would not be permitted to undertake the role if that occurred.
9. In relation to general deterrence, the Respondent directed the Tribunal to the decisions in Islam and Australian Securities and Investments Commission[73] (Islam) and Murphy and Australian Securities and Investments Commission.[74] I have also considered the comments by Senior Member, now Deputy President, Lazanas in Henley and Australian Securities and Investments Commission (Henley)[75] in which she cited the statements made in the Second Reading Speech to the Superannuation Laws Amendment (Capital Gains Tax Relief and Other Efficiency Measures) Bill 2012 (Cth) that SMSF auditors 'play a vital role in maintaining the integrity of a major sector of the superannuation system'. I have further considered the comments by Deputy President McCabe in Townshend that regulatory action will communicate a clear message to others about the importance of complying with requirements.[76]
10. In relation to factor (e), the mitigating circumstances that may make disqualification a disproportionate or otherwise inappropriate response is the remorse he has displayed. In this regard, I consider Mr Sidhu's expression of contrition was actually felt and that he would in the future attempt to achieve the high standards required of him. During closing submissions, Mr Sidhu's counsel repeated the offer of a suspension for a period with conditions imposed on Mr Sidhu's registration. I agree with the Respondent's submission provided during closing that it is not open to the Tribunal to impose conditions because the Tribunal does not acquire all the powers of ASIC, only those that are necessary to review the decision made by it.[77]

1. As previous Tribunal decisions have acknowledged, a balancing exercise is required when deciding on a regulatory response.[78] Previous Court and Tribunal decisions have also noted that, when considering the appropriateness of regulatory action, one must keep in mind the objects of the SIS Act.[79] I have found it useful to consider whether the failures alone could substantiate a disqualification decision, or whether it is the failures together which do. I note that there have been decisions of the Tribunal that have found disqualification to be the correct or preferable response for a sole failure of an auditor to carry out or perform adequately and properly the duties of an approved SMSF auditor, and for a sole failure to comply with auditor independence requirements in the SIS Act and Regulations. I consider that, given the circumstances in this case, disqualification could be a disproportionate response to the failures on their own. Although I can see some of the considerations and conclusions reached in the Islam as relevant to this case, I have not found Mr Sidhu to be misleading or deceptive in his evidence. Whether the failure to comply with auditor independence requirements on its own justifies disqualification is finely balanced, given Mr Sidhu's misconception and the ATO's educational materials stating that, during the time these audits were conducted, it had been taking an educative approach to compliance. However, I find inescapable the conclusion that the cumulative effect of the breaches shows that Mr Sidhu lacks the judgement, competence and diligence required to carry out the vital role of an approved SMSF auditor. Therefore, I find that disqualification is the appropriate response and as such the reviewable decision is affirmed.

Exhibit A1 - Affidavit of Grant Abbott dated 08/02/25

Exhibit A3 - ATO, SMSF auditors and Auditor Independence after 1 July 2021, 28 July 2021

Exhibit A4 - ATO, ATO's role and compliance approach, Last updated 25 November 2022

Aldo Paciocco, Australian Securities and Investments Commission

[1] Respondent's closing submissions at [18].

[2] Transcript of proceedings at [P-20:15-20].

[4] Transcript of proceedings at [P-19: 45].

[6] [2009] AATA 286.

[7] Respondents Statement of Facts Issues and Contentions at [128]-[129].

[8] Transcript of hearing at [P-33: 5].

[9] Applicant's Amended Statement of Facts, Issues and Contentions at [21].

[10] Respondent's closing submissions at [25].

[11] Respondent's closing submissions at [27].

[12] Transcript of hearing at [P23: 20-35].

[17] Applicant's closing submissions at [21].

[20] Respondent's closing submissions at [10].

[21] Transcript of hearing at [P-34: 10-15].

[23] Respondent's closing submissions at [44].

[24] Applicant's closing submission at [30].

[27] Transcript of hearing at [P46:36-47; 38].

[39] Transcript of hearing at P-69: 45-46; P-70: 1-2.

[42] Transcript of hearing at P-72: 40-46.

[44] Applicant's closing submissions at [38].

[48] Respondent's closing submissions at [109] and Exhibit A4.

[52] Respondent's closing submissions at [116].

[55] [2023] AATA 3810 at [28].

[56] APES 110, 2011 pages 12-13 cf APES 110, 2020 pages 26-30.

[57] APES 110, 2011 page 13 cf APES 110, 2020 page 13.

[58] Applicant's closing submissions, pages 31-32.

[60] Respondent's closing submissions at [123].

[64] Respondent's closing submissions at [124].

[65] Transcript of hearing at P-27: 38-47; 20-31.

[67] Applicant's closing submissions at [33].

[68] Transcript of hearing at P-78: 8-23.

[69] Respondent's closing submissions at [126].

[70] Transcript of hearing at P-79: 16-30.

[75] [2024] AATA 82.

[77] Shi v Migration Agents Registration Authority [2008] HCA 31.

[79] Australian Securities and Investments Commission v Gilliland [2022] FCS 1421 at [36].