STATEMENTS BY SENATORS
Senator SCARR (Queensland) (12:15): I'm speaking on a number of matters in this presentation. Earlier today, ASIC released Accounting for your super:super fund financial reporting and audit 2025-26, report 841, in relation to the performance of some of Australia's largest audit companies in providing audit services in relation to registrable superannuation entities.
Some of the findings in relation to this report were deeply disturbing. I commend an article written by Lucas Baird and reported in the Australian Financial Review entitled 'EY, PwC ticked off $80b in private assets without enough proof'. Australians have $4.8 trillion of funds in superannuation.
It's an extraordinary amount of money. A lot of that money is invested in unlisted assets, where there isn't transparency, because the value of those assets is not listed on, say, the ASX. It makes it absolutely crucial that the audit processes which are applied to assess valuations are rigorous and provide transparency with respect to the value of the holdings of Australians' retirement funds.
This report by ASIC is deeply disturbing. Let me list some of the summary of audit surveillance findings which are contained in this report. On page 13, it says: Auditors' procedures often did not sufficiently address the valuation risks associated with unlisted investments and were not adequate to obtain sufficient appropriate audit evidence.
This is extraordinary. We're talking about PwC and EY, two of Australia's largest audit companies, and they're failing to discharge their obligations and failing to conduct audits in accordance with audit practice 101. This is what they found.
On table 3, it says: For externally managed investments, three auditors did not adequately test the reliability of prices provided by external fund managers, or test the methods, assumptions and data used for the valuations. It's extraordinary. It goes on: For internally managed investments, two auditors did not obtain sufficient appropriate audit evidence for the valuations.
This is basic stuff. It says: One auditor had insufficient audit documentation of the explanations and supporting evidence for valuation differences. It goes on and on.
On page 14, of the six registrable superannuation entity audit surveillances they conducted, it says: we had findings relating to the audit of unlisted investment valuations for three (two from EY and one from PwC). … … … The findings relate to $80 billion of unlisted investments, which is 29% of the $275 billion of investments covered by our six RSE audit surveillances.
So ASIC conducted an inquiry in relation to valuations for $275 billion of investments and found issues with respect to $80 billion. What else is out there? There's $4.8 trillion under management—$4.8 trillion of your superannuation funds under management.
On this analysis, we're talking about more than 25 per cent—29 per cent—of what they engaged in reviews of. Twenty-nine per cent failed to undertake appropriate audit practices. That's not good enough, and I think EY and PwC should be explaining themselves to the Australian people with respect to what's gone on here.
I can tell you, as a member of the Parliamentary Joint Committee on Corporations and Financial Services, under the outstanding leadership of Senator Deborah O'Neill, this is certainly a matter which I'm sure we will be considering—how to bring this issue to light to the public and hold those accountable for these absolute failures in auditing unlisted financial assets contained in Australian superannuation funds.
In the United States, they introduced the Volstead Act in 1920. The Volstead Act was the act which introduced prohibition in the United States, prohibiting the sale of alcohol et cetera in 1920. It led to an explosion in organised crime.
Al Capone and others made millions of dollars out of it. It wasn't until 1933 that the prohibition was reversed. The Volstead Act was repealed.
It took 13 years, and during that time organised crime in the United States exploded. We have a similar phenomena occurring in Australia with respect to the illegal tobacco industry. In one of the greatest public policy failures any government has achieved, if I can use that word, billions of dollars have been directed, in effect, from the public purse in excise duties on tobacco to organise crime.
Everywhere you go in Australia there's a proliferation of illegal tobacconists selling illegal tobacco such that it's been reported that the profits being generated by organised crime are somewhere as high as between $4.1 billion and $6.9 billion. That's money that should be received by the taxpayers of Australia. Instead, it's going to organise crime.
This is also hurting small businesses in my home state of Queensland. I refer to an article by Andreas Nicola which says businesses neighbouring tobacco stores face fivefold insurance hikes after fire bombing wave. This isn't just hurting the Australian government in terms of excise receipts; it's also hurting the small businesses that are located near illegal tobacconists.
I want to quote one of those small businesses that's been impacted simply by being a neighbouring business. Estie Derksen, who runs a South African grocery business in Browns Plains, has been hit three times because she had a tobacco shop next to her firebombed. This is someone running a small business.
The illegal tobacconist next door gets firebombed, and she's impacted. The first time they lost 30 to 40 per cent of business for months, because it took three months to get a custom door, and a lot of people thought they were closed. The second time they were forced to close for a couple of months.
She said: 'Emotionally, my husband and myself went through a period of stress and financial stress that had a massive impact on us. We had to take money out of our home mortgage just to fund ourselves and just to keep going.' She said they tried to leave, but 13 out of 15 places they looked at were still next to an illegal tobacconist or a tobacconist. Insurance is going up through the roof, even if you can get insurance.
All of this is as a result of the government's failure to properly manage illegal tobacco and to have a realistic excise policy. I commend Angus Taylor and the coalition leadership for the coalition's plan to drop excise by 80 per cent to make sure that Australians are redirected from buying illegal tobacco products, which are funnelling billions of dollars of profit to illegal crime, to obtain a legal, regulated product so that these devastating consequences on small businesses can be avoided.
We shouldn't wait the 13 years the United States waited to repeal prohibition back in the 1930s. Lastly, in 2032, the Olympics and Paralympics will come to Queensland. I won't be presenting medals; I'm pretty sure of that.
But I did have the opportunity to present medals at Ipswich Little Athletics last Saturday, and it was an absolute joy. I want to congratulate the organisers, including centre manager Joshua Roney. I want to give a shout-out to one inspiring participant.
Jett Troder is a 12-year-old. He has cerebral palsy. He's also a para-athlete, and he's in the F37 class.
He engaged in the national championships for discus and shotput. He aspires to represent Australia at the Paralympics, so I say: well done, Jett. You're absolutely an inspiration.
It was wonderful to meet you, and, if you do represent Australia—and I hope you do—I'm going to be there to watch you perform.