The Chartered Accountants Australia and New Zealand (CA ANZ) said the surveillance report has paid particular attention to valuing unlisted assets and that these are common in SMSF portfolios.
Amir Ghandar, reporting and assurance leader at CA ANZ, said valuing these assets frequently involves complex judgement calls that can have significant implications for member outcomes.
“ASIC’s report rightly acknowledges the importance of high-quality auditing and financial reporting to the integrity of Australia’s superannuation system,” Ghandar said.
“Robust reporting is essential and, when it comes to valuing complex assets, results matter – not just the effort – which is why finding the right balance is crucial.”
In its report, the Australian Securities and Investments Commission (ASIC) stated it found superannuation trustees and auditors should be doing more so that valuations of assets in financial reports are reliable and give members confidence in their investments.
“From our review of financial reports, we found RSEs took different approaches when categorising unlisted investments, often with limited disclosure about their approach. As a result, it was difficult for a user to compare investments between RSE financial reports, or to understand how much they could rely on those valuations,” it said.
“We are of the view that auditors are not doing enough to obtain sufficient audit evidence that provides reasonable assurance about investment valuations in the RSE financial reports.”
Furthermore, it stated that auditors also did not adequately challenge the valuations provided by external fund managers.
Shelley Banton, director of Super Clarity, told SMSF Adviser that there is a “commonality of theme” in terms of SMSF auditors not having sufficient, appropriate audit evidence for market valuations.
“We’re already seeing a lot of auditors being referred to ASIC, and the main reason is for a lack of audit evidence,” Banton said.
“It does relate to market valuations and that commonality that exists between auditors of SMSFs and auditors of APRA funds, where they do need to get a deeper look into the methodology that’s been used to make sure they understand what they’re using actually reflects what’s fairly stated in the financial statements.”
Banton continued that it can become a “catch-22” situation for auditors.
“It’s up to auditors to understand what [trustees] have used [to come up with a valuation], how they’ve used it and the way in which they’ve used it to get to that market valuation. If we can’t do that, we’ve got to ask for more information,” she said.
Ghandar added ASIC’s guidance is helpful, but trustees and auditors still need to use their judgement to focus on what matters most at year end.
“The report is a must-read for superannuation fund trustees and their auditors, who should act on ASIC’s recommendations by ensuring that fair value disclosures and expense information are clear and meaningful for fund members and that robust audit evidence is provided for investment valuations,” he said.
