ASIC Sues Auditeo Over First Guardian Audit Failures | SMSF
ASIC has launched Federal Court proceedings against Auditeo Australia Pty Ltd and two auditors over alleged serious audit failures linked to the First Guardian Master Fund, highlighting the critical role auditors play in providing reliable assurance.
ASIC has commenced Federal Court proceedings against Auditeo Australia Pty Ltd and two auditors over alleged serious audit failures involving the First Guardian Master Fund.
The action provides an important reminder for accounting firms and professionals working with SMSFs and other financial structures about the critical role of an auditor and the importance of conducting audits in accordance with applicable auditing and assurance standards.
According to ASIC, the alleged failures occurred before the collapse of the First Guardian Master Fund. More than 6,000 Australians were exposed to its collapse, with liquidators warning that losses could be as high as $446 million.
What is ASIC alleging?
ASIC alleges that unqualified audit reports relating to First Guardian and its compliance plan for the 2020 to 2024 financial years were false or misleading.
The reports were issued by Auditeo and signed either by lead auditor Ajm Didarul Islam Khan or, for certain compliance plan audits, Brian Robert Taylor.
ASIC alleges that the reports contravened section 1308(5) of the Corporations Act 2001 (Cth).
ASIC further alleges that Auditeo, Mr Khan and Mr Taylor failed to comply with the auditing and assurance standards applicable to the audits, did not obtain sufficient and appropriate audit evidence, and did not perform the audits with due care and skill.
Significant audit failures alleged by ASIC
The ASIC media release identifies several specific allegations relating to the First Guardian audits.
No financial audit demonstrated for 2021
ASIC alleges that Auditeo's audit files do not demonstrate that a financial audit was conducted for the 2021 financial year, despite Auditeo and Mr Khan issuing an audit report for that year.
Significant assets allegedly went untested
ASIC alleges that approximately $137 million of reported assets were entirely untested by Auditeo and Mr Khan during the 2022 financial year.
According to ASIC, the amount of untested assets increased to approximately $170 million in 2023.
Compliance plan concerns
ASIC also alleges that Auditeo and Mr Taylor failed to consider the correct compliance plan that applied for part of the 2022 financial year and the entire 2023 financial year.
Why auditor independence and audit quality matter
For accounting firms working with SMSFs, the ASIC action highlights the importance of the auditor's role in providing independent assurance.
ASIC Chair Sarah Court said auditors play a critical gatekeeper role in maintaining trust in markets and helping ensure investors receive an accurate picture of a scheme's financial position.
ASIC also stated that compliance plans play a fundamental role in the regulatory framework designed to protect retail investors, with auditors providing reliable assurance that responsible entities are adhering to those plans.
While this ASIC action concerns the First Guardian Master Fund, rather than SMSF audits, the broader message about audit quality and the auditor's responsibilities is relevant to professionals across the auditing sector.
The importance of sufficient and appropriate audit evidence
ASIC's allegations specifically include claims that sufficient and appropriate audit evidence was not obtained.
For accounting firms, this reinforces the importance of working with an SMSF auditor who takes the audit process seriously and understands the importance of obtaining appropriate evidence to support audit conclusions.
A quality SMSF audit is not simply about completing an annual compliance requirement. The audit process provides independent assurance and requires appropriate consideration of the information and evidence relevant to the fund.
ASIC's 2026 enforcement priority
ASIC stated that the action forms part of its 2026 enforcement priority of seeking accountability for the collapse of First Guardian and related funds.
ASIC has identified auditor misconduct and holding those responsible for the collapse of the Shield and First Guardian Master Funds to account as key enforcement priorities for 2026.
ASIC is seeking declarations of contravention, financial penalties, injunctions and other orders from the Court.
ASIC is also seeking civil penalties against Auditeo, Mr Khan and Mr Taylor for alleged contraventions of section 1308(5) of the Corporations Act through making or authorising statements in audit reports submitted to ASIC that ASIC alleges were materially false or misleading. ASIC is also seeking orders restraining the defendants from conducting certain audit activities.
What does this mean for accounting firms?
The ASIC proceedings serve as a timely reminder of the importance of selecting an experienced and reliable auditor.
For accounting firms managing SMSF clients, the SMSF audit forms an important part of the annual compliance process. Working with a professional SMSF auditing firm can help ensure that the audit receives the appropriate attention and that the auditor's findings are supported by the relevant audit evidence.
At Superannuation Audit Services, we understand that accounting firms need an SMSF auditor they can rely on to provide professional, independent and thorough SMSF audit services.
Our team works with accounting firms Australia wide, with a focus on providing a straightforward and professional SMSF audit experience.
A timely reminder about the role of auditors
The First Guardian proceedings demonstrate why the role of an auditor carries significant responsibility.
ASIC alleges that the audit opinions in question were issued despite there being no reasonable basis for those opinions and despite significant audit work required under auditing standards not being performed. ASIC also stated that the alleged failures occurred before the collapse of the First Guardian Master Fund.
For accounting firms and their SMSF clients, maintaining confidence in the SMSF audit process depends on auditors performing their role with appropriate care, skill and attention to the evidence available.
What happens next?
ASIC has commenced Federal Court proceedings and is seeking various declarations, penalties, injunctions and other orders. The allegations made by ASIC are matters for determination by the Court.
ASIC has stated that it will post important updates about the First Guardian Master Fund on its dedicated webpage.
Choosing the right SMSF auditor matters
The ASIC action is a reminder of the important role auditors play in providing assurance and maintaining confidence in financial reporting and compliance.
For accounting firms, choosing an experienced SMSF auditor is an important consideration when managing the annual audit requirements of SMSF clients.
At Superannuation Audit Services, we provide professional SMSF audit services to accounting firms and SMSF professionals Australia wide.
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Disclaimer: This communication is for general informational purposes. For tailored advice specific to your firm’s circumstances, please contact us directly
