Questions raised on Shield, First Guardian audits

Mike Taylor

Managing Editor and Publisher

8 August 2025

Attention around the collapse of the Shield and First Guardian Funds has turned to the role of auditors in circumstances where audit reports did not point to concerns about the schemes until mid 2024.

Financial Newswire has sighted a compliance plan audit report for the Shield Master Trust filed with the Australian Securities and Investments Commission (ASIC) in July, 2024, covering the financial year ending 30 June, 2023, for an audit undertaken by reputable firm, BDO.

It was in that report that BDO said that the directors of Keystone Asset Management as the Responsible Entity (RE) for the Shield Master Fund had not provided BDO “with access to information that we require to form our opinion, including but limited to all books and records of the Company including related party transactions/balances, legal advice and corporate documentation”.

“The Responsible Entity have not met the requirements of their compliance plan in numerous instances during the year ended 30 June 2023, including, the financial reporting and lodgement obligations of itself as Responsible Entity or the Scheme it manages for the year ended 30 June 2023 (and half years ended 31 December 2022 and 2023 for the scheme),” the BDO audit report said.

“Various Financial Requirements for Cash Sufficiency throughout the year ended 30 June 2023 including that calculations were not approved by the Directors for the December 2022 quarter, all quarters the cash needs calculations were not prepared on 12-month forecast, did not include the stated assumptions underlying the forecasts as required,” it said.

Louis Christopher, whose research and ratings firm, SQM Research, has been subjected to criticism over its rating of the Shield Fund said auditors are key gatekeepers and the accuracy and timeliness of their reports are a fundamental part of making a ratings assessment.

He pointed out that the BDO report in question had in fact only become available after SQM Research had actually downgraded the Shield Fund based on its own inquiries.

Christopher restated an assertion that he made alongside Morningstar’s Manager, Research and Ratings, Matt Olsen, during Financial Newswire’s Advice Wealth and Super Conference in March that ratings houses are not auditors.

Examination of the audit of the First Guardian Master Fund via its Responsible Entity Falcon Capital has also given rise to questions being asked of ASIC about the status of its scheme auditor, Audit Services Plus.

The query relates to ASIC’s own records showing that the firm was deregistered effective from 13 June, 2022 under Section 601AA relating to voluntary deregistration.

ASIC data shows, however, that audit reports for First Guardian continued to filed up to the middle of October, last year.