Australia’s corporate regulator has flagged shortcomings in the way superannuation funds value and disclose investments and account for marketing spend, as well as gaps in audit work underpinning those figures, in its first dedicated review of the sector’s financial reporting.
‘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, examined financial reports from 60 registrable superannuation entities for the year ended 30 June 2024 and five audit files. The review focused on how funds value and disclose investments and how they disclose expenses.
ASIC found funds took varying approaches to categorising unlisted investments within the fair value hierarchy, often with scant explanation of their methods. The inconsistencies made it hard for users to compare portfolios across funds or gauge how much reliance to place on reported valuations.
The regulator also found some funds did not separately disclose sponsorship and advertising costs, adopting a narrow, quantitative view of materiality that kept those expenses aggregated.
On audit quality, ASIC said auditors were not obtaining enough evidence to support investment valuations. Given the size of superannuation entities, auditors applied high materiality thresholds, which can mean less testing and unexamined variances. ‘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 said it will keep RSE financial reports and audits under scrutiny in its 2025–26 surveillance programme and will consider regulatory action where it identifies significant breaches of the Corporations Act 2001.
The report is the first in a planned trio on financial reporting and audit quality in 2024–25, with a paper on auditor independence due in early October and the annual public report on financial reporting and audit to follow later that month. ASIC said the expanded programme demonstrates its commitment to high‑quality financial reports and audits.
This cycle marks the first time RSEs have had to lodge audited financial reports with ASIC, following a requirement that began for financial years starting on or after 1 July 2023. Of the 60 funds reviewed, 17 were asked for additional information. The five audit files assessed were drawn from the five large audit firms that together sign off on most RSE financial reports.
As part of its wider work, ASIC has reissued Regulatory Guide 34, consolidating and simplifying guidance on auditors’ obligations to report contraventions and clarifying that those obligations extend to RSE audits. The regulator reminded auditors of their duty to report contraventions, stressing that such reports are taken seriously.
