ASIC sues First Guardian-linked auditors

ASIC has commenced proceedings against Auditeo Australia and two auditors for their involvement in the First Guardian Master Fund failure.

ASIC alleges that unqualified audit reports on First Guardian and its compliance plan for the 2020 to 2024 financial years, issued by Auditeo and signed by either lead auditor Ajm Didarul Islam Khan or, for certain compliance plan audits, Brian Robert Taylor, were false or misleading.

Khan is the sole director and shareholder of Auditeo and was the lead auditor for the First Guardian financial audits.

Taylor was engaged by Auditeo as the lead auditor in relation to most of the First Guardian compliance plan audits.

ASIC alleges that Khan and Taylor failed to comply with auditing and assurance standards that applied to the conduct of the audits, did not obtain sufficient and appropriate audit evidence and did not perform the First Guardian audits with due care and skill.

Auditeo's audit files appear to not demonstrate that any financial audit was in fact conducted for the 2021 financial year. This is despite Auditeo and Khan issuing a report for that year.

In the 2022 financial year, some $137 million of reported assets were entirely untested by Auditeo and Khan. The following year, the untested amount increased to about $170 million.

Auditeo and Taylor also failed to consider the correct compliance plan that applied for part of the 2022 financial year and the entire 2023 financial year.

All in all, ASIC believes that audit opinions were issued despite having no reasonable basis and that the appropriate level of audit work was not performed.

"The alleged failures in this matter occurred before the collapse of the First Guardian Master Fund, with a devastating impact on investors," ASIC chair Sarah Court said."

"Just six months after Auditeo issued unqualified audit reports in relation to First Guardian, liquidators were appointed. More than 6000 Australians were exposed to its collapse, with liquidators warning losses could be as high as $446 million."