Auditor Prohibitions Explained
Auditor independence is fundamental to trust in financial reporting, which is why strict prohibitions exist to prevent auditors from undertaking activities that could compromise their objectivity.
Why Your Auditor Can’t Do Everything
One of the most common questions we’re asked is:
“Our previous auditor prepared our BAS and tax return — why can’t you?”
It’s a fair question, especially for community organisations that value continuity and efficiency. The short answer is: auditors must remain independent. That independence is what gives members, regulators, and funders confidence in your financial statements.
This article explains why those boundaries exist, what work must be done by registered professionals, and how this actually protects your organisation.
Auditor Independence: the foundation of trust
Auditors are required to comply with strict professional and ethical standards, including APES 110 – Code of Ethics for Professional Accountants.
A key principle of this Code is independence — both in fact and appearance.
In practical terms, this means:
An auditor cannot audit their own work
An auditor cannot take on management responsibilities
An auditor must not perform certain services that create self-review or advocacy threats
These rules are not optional, and they don’t change based on how helpful or experienced a prior adviser may have been.
Why auditors cannot prepare BAS or tax returns
Preparing or lodging:
Business Activity Statements (BAS)
Income tax returns
PAYG withholding
Superannuation compliance
Tax calculations or tax advice
is tax agent or BAS agent work, not audit work.
Under Australian law, these services must be provided by a registered tax practitioner through the Tax Practitioners Board.
You must be registered to provide tax agent, BAS, or tax (financial) advice services for a fee or other reward.
If an auditor were to prepare your BAS or tax return and then audit the resulting figures, they would be reviewing their own work, which is expressly prohibited.
You can verify registration or find a practitioner via the Tax Practitioners Board’s public register.
Bookkeeping services that require a BAS agent
Many organisations are surprised to learn that some day-to-day bookkeeping tasks are regulated.
A registered BAS agent is required when the fee for services includes:
Preparing or lodging BAS or IAS
Calculating GST obligations or entitlements
Coding transactions that affect GST outcomes
Providing advice about GST, PAYG or BAS reporting
A helpful summary of what constitutes BAS services is published by the Tax Practitioners Board and is worth reviewing before engaging a bookkeeper on a fee for service.
Auditors may review accounting records as part of an audit or review engagement — but they cannot prepare or correct BAS-related information.
Asset valuations must be done by registered valuers
Another common area of confusion is asset valuations, particularly land and buildings.
For audit purposes:
Valuations must be independent
They must be performed by a registered valuer
In Queensland, valuers are regulated by the Valuers Registration Board of Queensland.
This ensures:
Appropriate qualifications and professional standards
Independence from management and the auditor
Reliable, supportable evidence for financial reporting
An auditor cannot prepare a valuation, select a value, or adjust an asset balance themselves.
Why this actually benefits your organisation
These separations of responsibility exist to protect you, not to create extra work.
They ensure:
Financial statements are credible and defensible
Committee members are protected from governance risk
Grant providers and regulators can rely on the reports
Auditors can issue an independent conclusion with confidence
Clear role boundaries also reduce the risk of disputes, restatements, or qualified audit opinions down the track.
Most well-run organisations use a team approach:
A registered bookkeeper or BAS agent for day-to-day compliance
A registered tax agent where required
A qualified, independent auditor or reviewer for assurance
Independent valuers when asset revaluations are needed
Each professional does what they are legally allowed — and best qualified — to do.
Technical note for auditing students: auditor independence, prohibitions and APES 110
For auditing students, auditor prohibitions are not simply rules to memorise — they are part of the broader concept of independence, which underpins the credibility of the audit.
Independence is fundamental to every audit engagement. The auditor’s role is to form an opinion on whether the financial report is true and fair, while those charged with governance are responsible for preparing the financial report. If independence is compromised, users of the financial report cannot rely on the auditor’s opinion.
Under APES 110 Code of Ethics for Professional Accountants, independence has two key dimensions:
Independence of mind — the ability to make objective judgements with professional scepticism
Independence in appearance — whether a reasonable third party would perceive the auditor as independent
Both are equally important. An auditor must not only be independent, but also be seen to be independent.
The conceptual framework approach
APES 110 does not rely solely on strict rules. Instead, it applies a conceptual framework, requiring auditors to:
identify threats to independence
evaluate the significance of those threats
apply safeguards to eliminate or reduce them to an acceptable level
If threats cannot be reduced to an acceptable level, the auditor must decline or discontinue the engagement.
This framework is applied continuously throughout the audit, not just at acceptance.
The five key threats to independence
The Code identifies five categories of threats that students should know:
Self-interest threat — financial or personal interests influencing judgement
Self-review threat — auditing your own work
Advocacy threat — promoting a client’s position
Familiarity threat — becoming too close to the client
Intimidation threat — pressure influencing objectivity
These threats explain why prohibitions exist. For example, providing bookkeeping services to an audit client creates a self-review threat, while acting as an advocate in litigation creates an advocacy threat.
Auditor prohibitions: why some services are not allowed
Some threats are so significant that they cannot be reduced to an acceptable level. In these cases, APES 110 imposes explicit prohibitions.
For example, auditors are prohibited from:
assuming management responsibility for a client
preparing accounting records or financial statements in many circumstances
acting as a company secretary or director
promoting or underwriting a client’s financial interests
acting as an advocate in disputes or litigation
having certain financial interests or business relationships with the client
As outlined in the APES 110 prohibitions summary, these restrictions apply because they create threats — particularly self-review, advocacy and self-interest threats — that cannot be adequately safeguarded.
The document also highlights that some services are strictly prohibited, while others may be allowed only if the conceptual framework confirms that threats are reduced to an acceptable level.
Non-assurance services and independence
A key area of focus for students is the provision of non-assurance services to audit clients.
Even when services are not explicitly prohibited, auditors must assess whether:
the service will affect the financial statements
the audit team will need to rely on their own work
management has taken responsibility for decisions
If these conditions create a self-review or other threat that cannot be mitigated, the service cannot be provided.
Safeguards and quality control
To manage independence risks, both firms and clients implement safeguards such as:
audit partner rotation
independent reviews and peer review processes
strong corporate governance (e.g. audit committees)
clear separation of audit and non-audit services
internal quality control systems (e.g. ASQC 1 / ISQM 1)
However, safeguards reduce risk — they do not eliminate it. The auditor must still exercise professional judgement.
Key takeaway for students
Auditor prohibitions are not arbitrary rules — they are the practical outcome of applying the independence framework in APES 110.