Section 285 of the Act imposes a responsibility on registered schemes, which includes mortgage schemes, to comply with the requirements of Chapter 2M of the Act dealing with financial reports and audit requirements. Furthermore, section 285(3) deems a scheme’s responsible entity responsible for the performance of the financial reporting obligations in that Chapter in respect of the scheme.

In addition to the above obligations, the responsible entity of a scheme is required to comply with Part 5C.4 of the Act and expected to apply ASIC Regulatory Guide 132 Managed investments: Compliance plans. The requirements of the Act impose obligations on the responsible entity to ensure that compliance plans are in place which set out adequate measures that the responsible entity is to apply in operating the scheme to ensure compliance with the Act and the scheme’s constitution.

As with managed investment schemes generally, the responsible entity of a mortgage scheme which is registered under section 601ED, operates the scheme on behalf of the members of the scheme. To this end, the responsible entity and the directors of that entity, are responsible to the members of the scheme for the operation of the scheme, including for meeting it’s statutory and other legal obligations. The responsible entity will need to establish and maintain an adequate system of internal control to protect the interests of members who have invested in the scheme.

A scheme’s internal control structure is to provide its management, i.e. the responsible entity, with reasonable, but not absolute assurance, that the operations of the scheme are orderly and efficient, and that irregularities are prevented as far as possible and detected should they occur. An adequate internal control system will also provide management with reasonable assurance that assets are safeguarded from unauthorised use or disposal, and that the financial and other records of the scheme reflect the entire operational activities of the scheme and permit the timely preparation of financial reports required by the Act.

The auditor of a scheme’s financial report ordinarily obtains a preliminary understanding of the scheme and its environment, including its internal control, sufficient to identify and assess the risks of material misstatement of the financial report whether due to fraud or error, and sufficient to design and perform further audit procedures, which may include, where appropriate, tests of the operating effectiveness of controls and other compliance measures in the context of the scope of the scheme’s financial report audit, in order to be able to form an opinion on it as required by Chapter 2M.^[3]

Similarly, the compliance plan auditor^[4] who conducts the audit of a scheme’s compliance plan under section 601HG, is required under ASAE 3100 Compliance Audits to obtain an understanding of the scheme’s compliance plan (the subject matter) and other engagement circumstances sufficient to identify and assess the risks of non-compliance, either of the responsible entity with the compliance plan or of the compliance plan with the Act, and be mindful of the compliance related expectations set out in RG 144, RG 45 and the other relevant ASIC regulatory guides, including those regulatory guides applicable to managed investment schemes generally.