The Australian Securities & Investments Commission (ASIC) has issued a stern warning to superannuation funds and auditors over ongoing deficiencies in the valuation of unlisted assets, according to a report released on Wednesday. This marks the regulator’s second assessment of financial reporting and audit practices within the superannuation sector, highlighting persistent concerns about inadequate scrutiny and overreliance on valuations provided by external managers.

ASIC Commissioner Kate O’Rourke acknowledged some improvements compared to the previous year but emphasized that progress remains insufficient. She stressed the importance of accurate asset valuations, noting that they have direct implications for members’ account balances, reported investment returns, fees, and ultimately, retirement outcomes. “Millions of Australians entrust superannuation trustees with their retirement savings,” O’Rourke said. “Trustees cannot outsource responsibility for ensuring investment valuations are accurate and reliable, even where external fund managers are involved.”

The report revealed that, out of 33 investments for which ASIC requested valuation information this year, only seven were supported by a valuation model or an independent valuation report. O’Rourke added that some audits lacked sufficient evidence, particularly relating to internally managed investments. In response, ASIC has issued formal notices to four auditors from three different audit firms involved in the surveillance, outlining its findings and concerns. All auditors have since proposed remedial actions.

The audit firms under review include BDO, Deloitte, EY, KPMG, and PwC. ASIC also identified troubling delays by some funds in reflecting significant asset writedowns in members’ account balances. In several instances, the adjustments were not accounted for until the following financial year, raising questions over whether members may have incurred higher fees as a result. “We saw there was a gap there in the accounting treatment, so that it was done in a different financial year, and that has fee consequences for the member,” O’Rourke noted. The regulator is continuing to investigate this issue.

This renewed scrutiny of valuation practices around unlisted assets comes amid broader regulatory and investor attention on the private credit sector. ASIC has announced plans to extend its review to the financial reports of an additional 20 super funds and 20 managed investment schemes. The oversight of managed investment schemes has drawn particular focus in the wake of recent scandals involving Shield and First Guardian, which exposed serious deficiencies in monitoring fund flows and underlying investments. The Australian market currently offers more than 3,000 managed investment schemes to investors.