Managed investment scheme audits: scrutiny of underlying assets remains critical

A recent auditor disciplinary decision highlights the importance of appropriate scrutiny of the underlying assets and valuations of managed investment schemes, particularly where investment structures are complex.

The Companies Auditors Disciplinary Board (CADB) has suspended the registration of former PKF Brisbane auditor Cameron Bradley following findings concerning the audits of three managed investment schemes operated by Australian Fiduciaries Limited.

The schemes were invested through a multi-tiered structure involving a number of funds and trusts, with the ultimate underlying assets comprising properties used as disability accommodation under the NDIS. The financial assets reviewed as part of the audits represented more than 90% of the schemes’ total assets.

The CADB found deficiencies in the audit work relating to those assets, including failures to obtain sufficient appropriate audit evidence, exercise appropriate professional scepticism and judgement, and adequately document the audit work undertaken. It also found that the audit reports should have expressed a qualified opinion or disclaimer of opinion.

Implications for responsible entities

While the decision concerns the conduct of an auditor, it also highlights the importance for responsible entities of ensuring that the assets and valuations underlying a managed investment scheme can withstand appropriate independent scrutiny.

This is particularly relevant for schemes involving private or illiquid assets, related entities or multi-layered investment structures, where establishing the existence and value of underlying assets may be more complex.

Responsible entities should ensure that appropriate records and supporting information are maintained in relation to scheme assets and valuations and that governance arrangements facilitate effective external audit.

ASIC has identified managed investment schemes as an area of audit focus for FY2026–27, with a selection of MIS audit files to be included in its audit surveillance program.

For further information or assistance with your obligations in relation to managed investment schemes or responsible entities, email Chris Mee at cmee@cnmlegal.com.au or Alanah McAliece at amcaliece@cnmlegal.com.au, or call 07 3211 4010.

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