Review uncovers gaps in audit evidence and disclosure practices
In its first review of super fund financial reporting and audits, ASIC has identified inconsistencies in investment disclosure approaches, limited transparency on sponsorship and advertising expenses, and insufficient audit evidence for some investment valuations.
Report 816 Accounting for your super: ASIC’s review into the financial reporting and audit of super funds (REP 816), which was published last month, highlighted the need for stronger governance and audit practices among registrable superannuation entities (RSEs).
“High quality audited financial reports underpin members’ confidence in the accuracy of information about the super funds that safeguard their retirement savings,” ASIC commissioner Kate O’Rourke said. “However, when trustees and auditors do not adequately perform their roles as gatekeepers, there is a potential risk of misstatement of asset values.”
O’Rourke explained that super trustees must "have appropriate governance arrangements to assist with the preparation of high-quality financial reports, while auditors must perform independent audits in accordance with the relevant auditing and assurance standards.”
ASIC’s review covered financial reports from 60 RSEs for the year ended 30 June 2024 and five RSE audit files. It found that the varying approaches in categorising unlisted investments under the fair value hierarchy made comparisons difficult and limited users’ understanding of valuations.
The report also noted that some trustees failed to separately disclose sponsorship and advertising expenses, often taking “a narrow, quantitative approach to materiality.” ASIC emphasised that such costs could be “qualitatively material” to members and should be disclosed to enhance transparency.
On the audit side, the regulator found that some auditors failed to obtain sufficient evidence to support investment valuations, particularly for unlisted and externally managed assets. Given the size of super funds, auditors were found to have applied high levels of materiality – sometimes in the billions of dollars – leading to reduced testing and limited investigation of discrepancies.
“We found that some auditors also did not adequately challenge the valuations provided by fund managers of managed investment schemes,” O’Rourke said. “This could undermine member confidence in the accuracy of financial information about their super fund.”
ASIC issued comment forms to four auditors outlining its findings and said it would continue working with them to address concerns.
The report marks the first in a series of three reviews examining financial reporting and audit quality in 2024–25. ASIC said it may take regulatory action where there are significant breaches of the Corporations Act 2001.
