ASIC sues audit firm over $446m First Guardian collapse

By Vikram Singh · 2026-08-01

What ASIC is alleging

Audit reports were signed. Opinions were clean. And, on ASIC's account, the work behind those opinions either fell well short of professional standards or, in at least one year, left no trace in the files at all. ASIC alleges that unqualified audit reports on the First Guardian Master Fund for the financial years ending 30 June 2021 to 30 June 2024 were materially false or misleading under section 1308(5) of the Corporations Act 2001.verifiedVerified Source: asic.gov.au^[1] Three defendants face those allegations: Auditeo Australia Pty Ltd, lead auditor Ajm Didarul Islam Khan and compliance plan auditor Brian Robert Taylor. No findings have been made against any of them.

The regulator's case spans both the fund's financial statements and its compliance plan audits. ASIC alleges Auditeo, Khan and Taylor breached auditing and assurance standards, failed to obtain sufficient audit evidence and did not perform the First Guardian audits with due care and skill.^[1] For Taylor specifically, ASIC alleges that he and Auditeo applied the wrong compliance plan for part of the 2022 financial year and the entirety of 2023.^[1]

The numbers: untested assets and a missing audit trail

In the 2022 financial year, ASIC alleges, approximately $137 million of reported assets were entirely untested by Auditeo and Khan, a figure that rose to roughly $170 million of untested assets in the 2023 financial year.verifiedVerified Source: asic.gov.au^[1] The fund held approximately $541.6 million in funds under management by 30 June 2024, meaning the untested portion in the penultimate year represented nearly a third of what became a very large pool of retail money.

The allegation concerning 2021 cuts deeper still. ASIC claims Auditeo's own audit files contain no evidence that a financial audit was conducted for that year, despite an unqualified report being issued.^[1] In audit terms, working papers are the only contemporaneous record that professional scepticism was applied, evidence was gathered and conclusions were earned rather than assumed.

Across all four years, ASIC's case presents a picture of clean opinions stacking up while, on its account, the evidentiary scaffolding beneath them was either absent or inadequate. The regulator alleges the conduct contravened section 1308(5) of the Corporations Act, which prohibits false or misleading statements in documents lodged with or required by ASIC.^[1]

How First Guardian collapsed and what investors stand to lose

The First Guardian Master Fund was registered as a managed investment scheme on 23 August 2019, with Falcon Capital Limited acting as its responsible entity. Retail superannuation money flowed into Defensive, Diversified and Growth Strategies unit classes, with the fund accumulating $541.6 million under management by the end of the 2024 financial year across more than 6,000 Australian investors.

Liquidators Ross Blakeley and Paul Harlond of FTI Consulting were appointed to both Falcon Capital and the First Guardian Master Fund on 9 April 2025, roughly six months after the final allegedly deficient audit opinions were signed, leaving more than 6,000 investors facing potential losses of up to $446 million.verifiedVerified Source: asic.gov.au^[1] Unqualified opinions issued in late 2024 gave no signal of the distress that prompted liquidation within the same financial year.

What investors ultimately recover will depend on what liquidators find in the fund's underlying assets. The $446 million figure represents an outer bound on potential losses, not a guaranteed outcome. The proceedings against Auditeo, Khan and Taylor will not directly restore investor funds, but successful civil action can result in penalties and send a signal about the regulator's appetite to hold gatekeepers accountable for what they sign.

ASIC Chair Sarah Court on auditors as market gatekeepers

ASIC Chair Sarah Court made the regulator's position plain. "Auditors play a critical gatekeeper role in maintaining trust in our markets and helping ensure investors receive an accurate picture of a scheme's financial position. When that role is not properly performed, the consequences can be severe."^[1]

Court was equally direct about the specific conduct alleged. "We allege audit opinions were issued despite there being no reasonable basis for those opinions and despite significant audit work required under auditing standards not being performed. The alleged failures in this matter occurred before the collapse of the First Guardian Master Fund, with a devastating impact on investors."^[1]

By framing auditors as gatekeepers rather than service providers, ASIC is articulating a theory of market function: that investors and regulators depend on auditors to surface problems the investor cannot independently observe. Clean opinions, on that view, become active misinformation when the underlying work is absent, not merely absent information. That framing also signals how ASIC intends to pursue auditor accountability as part of its 2026 enforcement agenda.

What comes next in the Federal Court

The proceedings are in their early stages. ASIC has filed its case; Auditeo, Khan and Taylor have not yet had the opportunity to respond fully before the court, and no findings have been made against any of the defendants. The Federal Court process will determine whether ASIC's allegations are established on the evidence, and what penalties or orders may follow.

For the broader audit profession, the case is a reminder that section 1308(5) of the Corporations Act applies to statements made in audit reports lodged with ASIC, not merely to the financial statements auditors opine on. ASIC's decision to name both the firm and two individual auditors reflects an approach of attaching personal accountability to professional sign-offs, consistent with how the regulator has approached other gatekeeper enforcement actions in recent years.^[1]

Bushletter sought comment from Auditeo Australia. No response was received before publication. ASIC's media release from 31 July 2026 is the primary public document on the proceedings at this stage, and the full allegations have not yet been tested before the Federal Court of Australia.

Vikram Singh

Vikram Singh writes about banking. He follows where money actually moves, from the strategy set in head office to what changes on a customer's phone.