ASIC flags gaps in super fund reporting

The regulator has highlighted weaknesses in super fund financial reporting, warning inconsistent disclosures and poor audit practices risk undermining member confidence.

ASIC has released its first report into the financial reporting and audit of super funds, identifying gaps in disclosure practices and audit quality across the sector.

The regulator has found inconsistent approaches to valuing and reporting investments, limited transparency on sponsorship and advertising expenses, and insufficient evidence used by auditors to support some valuations.

“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.”

ASIC stated funds took different approaches when categorising unlisted investments in the fair value hierarchy, with often limited disclosure of methods used.

This inconsistency made it difficult for members and analysts to compare valuations across reports or to judge their reliability.

The regulator also found that sponsorship and advertising expenses were not always separately disclosed, as some funds relied on narrow interpretations of materiality.

On the audit side, ASIC identified concerns with auditors adopting high levels of materiality, resulting in less detailed testing and some 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,” O’Rourke said.

ASIC has issued comment forms to four auditors outlining its findings and said it will continue working with them to resolve concerns. The regulator has confirmed it will take action under the Corporations Act if significant breaches are identified.

This review forms part of ASIC’s expanded 2024-25 program into financial reporting and audit quality.

ASIC plans to release a report on auditor independence in early October and its annual financial reporting and audit public report later that month.

RSEs have only been required to lodge audited financial reports with ASIC since financial years beginning on or after 1 July 2023. To support this process, ASIC has also updated its Regulatory Guide 34, clarifying auditor obligations when reporting contraventions.

ASIC said it will maintain its focus on super fund financial reports and audits as part of its 2025–26 surveillance program.