Was ASIC auditor oversight a factor in Shield, First Guardian?
The Australian Securities and Investments Commission (ASIC) has yet to act against the firms which audited the collapsed Shield and First Guardian funds but an Auditor-General’s report published in December pointed to ASIC’s own challenges in regulating auditors.
The Australian National Audit Office (ANAO) performance report on ASIC’s regulation of registered company auditors found the regulator’s approach to have been only “partly effective”.
The ANAO report was tabled in Parliament after media reports in August, last year, pointed to audit reports not identifying concerns about Shield and First Guardian until mid-2024.
What the report found is that ASIC was in good shape with respect to registering company auditors, monitoring ongoing compliance obligations and the payment of levies, but fell somewhat short on identifying quality issues.
“ASIC’s supervision of audit quality is based primarily on a small number of individual audit surveillances targeted at higher-risk entities,” the ANAO assessment said. “There is limited follow-through of quality issues identified in these surveillances other than reporting thematic findings to industry annually.”
“ASIC has not implemented procedures for using the audit deficiency reporting process established by legislation in 2012. As a result of these factors, ASIC’s visibility of audit quality or the impact of its own regulatory actions is narrow.
“ASIC has taken administrative and criminal enforcement action in the last five years; 88 per cent of cases with an enforcement result related to failure to pay levies or submit mandatory annual reporting rather than issues of audit quality or professional misconduct,” the audit report said.
The ANAO’s report conclusion said that while ASIC had components of an effective regulatory approach and supporting arrangement in place, it is not measuring its achievement of regulatory outcomes “which is important to demonstrate the effect use of public resources”.
“ASIC allocates the majority of its surveillances resources to individual audit file surveillances without assessing if this is the most effective use of surveillances resources,” the report said.
“ASIC’s approach to regulation of registered company auditors is partly effective,” it said. “Fundamental components of an effective regulatory approach are in place, such as ASIC’s administration of the registration of company auditors, monitoring ongoing compliance obligations such as mandatory reporting and payment of levies, and processing the resignation and removal of auditors from audit engagements.
“ASIC’s supervision of audit quality is based primarily on a small number of individual audit surveillances targeted at higher-risk entities. There is limited follow-through of quality issues identified in these surveillances other than reporting thematic findings to industry annually.
“ASIC has not implemented procedures for using the audit deficiency reporting process established by legislation in 2012. As a result of these factors, ASIC’s visibility of audit quality or the impact of its own regulatory actions is narrow. ASIC has taken administrative and criminal enforcement action in the last five years; 88 per cent of cases with an enforcement result related to failure to pay levies or submit mandatory annual reporting rather than issues of audit quality or professional misconduct.”
ASIC fail yet again on Audit quality.
ASIC fail yet again to learn anything from their failures.
Advisers pay yet again for ASIC failures
ASIC fail in so many instances but are never held liable or to account. Typical self serving bureaucratic muppets
ASICkjoke is incompetent.
Our system half a century ago put in place requirements around having trusts, funds, companies, and SMSFs audited to ensure their financial viability.
Penalties apply if the audit is not done.
Apparently no penalties apply if a dodgy audit is done.
Sure, ASICKjoke bans some auditors for failing their duties or ignoring conflicts etc, but they’re normally the low hanging fruit, typically single operator clueless individuals still operating like it is 1980.
While ASICkjoke happily preens and boasts about scalps of large banks and insto’s on the funds management side, rarely if ever has there been commentary or action against the bigger audit firms.
As per this case, the auditor’s sole job is to ensure financial viability and integrity of operations.
Perhaps it is with some relief that finally research houses that endorse questionable products are facing their own ‘Hayne’ moment (though I suspect in many ways planners will pay or suffer for that too, like BT’s knee jerk reaction of banning SMA’s on Panorama).
Not excusing bad planners, but how is a basic financial planner with limited access and a trillion varied tasks & responsibilities meant to have time or access to assess the ‘bad’ investment financials, deal structures or even fiscal integrity when fraud is at play.
Especially when both the auditor and research house, whose sole tasks are to do diligent investigation into these very things, give them a green light of all clear?
Being an actual victim of First Guardian I am disgusted that ASIC fail to do the basics. This fund should never have been a superannuation investment and to learn it was an MIS fund after the fact and learning ASIC is the regulator for MIS funds… what the fuck asic, actually what the fuck!