Brent Davey Financial Audit

What Brent Davey Financial Audit Actually Covers

It is not a standalone software package you download and run. The Brent Davey Financial Audit is a structured review methodology developed by Brent Davey, an Australian financial planner and author, for evaluating the quality and compliance of financial advice files. It is commonly used by practice owners, compliance officers, and audit consultants in Australia to assess whether a financial planning business is meeting ASIC, AFSL, and fiduciary duties under the Corporations Act. I spent years running these audits across small and mid-tier advisory practices, and the process is more tedious than people expect. Here is how it works in practice. You do not audit every single file. That is wasteful and usually impossible within budget. Take a stratified random sample. Pull at least 20 files per 100 active clients, making sure you cover different adviser types, advice types (ongoing advice versus one-off recommendations), and time periods going back at least 12 months. If your practice has had complaints or RG 175 compliance issues in the last two years, pull those files first. They are non-negotiable.

Check the Client Disclosure Statement and Know Your Client documentation. This is where most small firms cut corners. I remember one engagement where the adviser had clearly copy-pasted the CDS from a template three years earlier, but the client's superannuation situation had changed entirely. The fee structure listed in the CDS did not match what was actually being charged. This is a real regulatory exposure under RG 175. Flag it. Document it. Fix it before ASIC notices. This is the core. For each sampled file, go through the Statement of Advice or equivalent advice document. Verify the following: The last point is where most audits find material gaps. An adviser might recommend a superannuation rollover, but the file does not explicitly tie that recommendation back to the client's stated retirement goals or tax situation. That is a failure in the "suitability" chain.

If the file involves ongoing advice services, check that the annual review documentation is present and up to date. The review must cover changes to the client's circumstances, the continued relevance of the recommendations, and a updated fee disclosure. I once found a file where the last review was dated 22 months prior, and the client's circumstances had materially changed — they had received an inheritance and wanted to reassess their investment strategy. The adviser had simply renewed the mandate without any substantive review. That is a compliance breach and a potential damages claim waiting to happen. Cross-reference the fees disclosed in the advice document with the actual invoices and payment records. Any discrepancy here is a red flag under the best interest duty. If the CDS says a $2,200 annual service fee and the client is being billed $2,750, you need a written explanation for the difference, and ideally client sign-off. If it does not exist, document it and require remediation. Pull any client complaints, internal risk logs, and previous audit findings. Check whether prior issues have been resolved. Unresolved findings from a previous audit cycle are a common ASIC inspection trigger. Make sure your risk register is current and that every open item has an owner and a due date.

Compile your findings into a structured report. Categorize issues by severity: critical, major, and minor. Critical issues are those that create immediate regulatory or legal exposure — missing signatures, fee discrepancies without disclosure, absent reviews. Major issues are systemic problems like poor file hygiene or inconsistent templates. Minor issues are polish items. Then assign each finding a responsible party and a target resolution date. Follow up within 30 days. One thing that trips people up is treating the audit as a box-ticking exercise. The Brent Davey Financial Audit framework is designed to be substantive, not procedural. If you only check whether documents exist without assessing whether they are logically coherent, you will miss real problems. Another pitfall is not going deep enough into the advice file itself. Scanning the table of contents is not enough. Read the actual recommendation section. Check the numbers. Verify that the cash flow model referenced in the advice was actually run and is consistent with the recommendations. A less obvious issue: many practices store advice documents as PDFs without editable source files. When you need to verify calculations or trace data, you are stuck. I solved this on a recent engagement by requiring the adviser to produce the underlying Excel models for any quantitative analysis. It added three days to the process, but it prevented a situation where we could not independently verify a projected retirement outcome.

When This Approach Falls Short

The Brent Davey Financial Audit methodology works well for compliance-focused review of advice files. It is less useful if you are trying to assess the investment performance of a portfolio or the strategic financial planning quality beyond regulatory compliance. In those cases, you would need a separate investment review framework and a financial plan quality assessment. Some firms also find that the audit process is time-consuming — a thorough audit of 100 files typically takes two to three weeks for a single auditor, depending on file quality. If you are a solo practitioner with limited resources, you may need to phase it over several quarters rather than attempt a full-scope audit all at once. If you are looking for a structured template to run your own Brent Davey Financial Audit, I would recommend starting with the ASIC RG 175 guidance and mapping your checklist against those requirements, then layering on the Davey-specific review criteria around documentation quality and suitability evidence. Several professional bodies in Australia publish audit checklists that incorporate these principles, and they are a practical starting point before you invest in a formal audit engagement.