ASIC’s first report into the financial reporting and audit of super funds has revealed inconsistent approaches to disclosing investments, limited disclosure of sponsorship and advertising expenses, and insufficient audit evidence obtained in the valuation of some investments.
‘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.
‘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.’
Report 816 Accounting for your super: ASIC's review into the financial reporting and audit of super funds (REP 816) reveals the findings from ASIC’s review of financial reports from 60 registrable superannuation entities (RSEs) for the year ended 30 June 2024 and five RSE audit files (refer to Background for details).
ASIC’s review focused on the valuation and disclosure of investments and the disclosure of expenses (25-079MR).
REP 816 is the first in a series of three reports examining financial reporting and audit quality in 2024-25. ASIC will publish a report on auditor independence in early October, followed by its annual financial reporting and audit public report in late October. This expanded program of work in 2025 demonstrates ASIC's commitment to high quality financial reports and audits.
Valuation and disclosure of investments
ASIC’s review found RSEs took different approaches when categorising unlisted investments in the fair value hierarchy, often with limited disclosure about their approach.
These different approaches meant it was difficult for a report user to compare investments between RSE financial reports, or to understand how much they could rely on those valuations.
Disclosure of sponsorship and advertising expenses
ASIC’s review also found that sponsorship and advertising expenses were not separately disclosed in some financial reports because RSEs took a narrow, quantitative approach to materiality.
Audits of RSE financial reports
ASIC’s review of audit files found that auditors are not doing enough to obtain sufficient audit evidence about investment valuations in the RSE financial reports.
Given the size of RSEs, auditors adopted high levels of materiality, which can result in less audit work and variances not being investigated.
‘We found that some auditors also did not adequately challenge the valuations provided by fund managers of managed investment schemes. This could undermine member confidence in the accuracy of financial information about their super fund,’ Ms O’Rourke said.
‘We issued comment forms to four auditors setting out our findings and will continue to work with them to resolve our concerns.’
ASIC will continue to focus on RSE financial reports and audits as part of its 2025-26 surveillance program. We will consider taking regulatory action where we see a significant breach of the Corporations Act 2001 (Corporations Act).
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Background
RSEs were required to lodge audited financial reports with ASIC for the first time for financial years that commenced on or after 1 July 2023.
ASIC conducted surveillance activities to ensure that RSE:
- financial reports were prepared in accordance with Australian Accounting Standards
- audits were conducted in accordance with Australian Auditing and Assurance Standards, and
- financial reports and audits complied with the Corporations Act.
ASIC reviewed 60 RSE financial reports for the year ended 30 June 2024. These RSEs were selected based on investment profiles, size and other intelligence. Of these, ASIC contacted 17 RSEs to obtain further information. ASIC also reviewed five RSE audit files, choosing one file from each of the five large audit firms that collectively audit the majority of all RSE financial reports.
As part of our broader financial reporting and audit program, ASIC has recently reissued Regulatory Guide 34 Auditor obligations: Reporting to ASIC. Changes to the guide include consolidating and simplifying guidance on auditor’s obligations to report contraventions to ASIC and reflecting changes to the law. These changes also include making clear that auditors are required to report contraventions when conducting audits of RSEs.
We remind auditors of their obligations to report contraventions to ASIC as we take these reports seriously.
