ASIC flags persistent reporting and audit quality gaps in Australia

Traders Union
All News
Regulators
ASIC reporting and audit gaps

Highlights

ASIC reviewed 353 financial reports and expanded audit surveillance to 25 files in 2025-26, identifying persistent weaknesses in revenue recognition, impairment, and asset valuation judgments.
ASIC now names large audit firms in surveillance findings and requires BDO, Deloitte, Ernst & Young, Grant Thornton, KPMG, and PwC to implement and report on self-assessment action plans addressing independence and quality issues.
Since 1 July 2025, ASIC initiated Federal Court proceedings against three auditors and two companies, issued over $9 million in infringement notices, and obtained $1.6 million in penalties related to financial reporting breaches.

Surveillance findings and regulatory response

As reported by ASIC, the regulator says preparers of financial reports and auditors still are not getting key fundamentals right, particularly where accounts rely heavily on significant judgement. ASIC Commissioner Kate O’Rourke says some preparers and auditors did not adequately challenge major assumptions on revenue recognition, impairment and asset values, and that auditors need to strengthen independence, evidence gathering, challenge of management assumptions and documentation of conclusions.

ASIC published the findings in Report 842, "ASIC’s oversight of financial reporting and audit 2025-26". In 2025-26, it reviews 353 financial reports covering 311 companies and 42 registrable superannuation entities, conducts financial reporting surveillances of 30 companies, and expands its audit surveillance program to 25 audit files across 19 companies and 6 RSEs at 12 audit firms, up from 15 audit files in 2024-25.

The regulator says ten companies make or agree to improve disclosure of material business risks in their operating and financial reviews after concerns are raised. Companies also make or agree to changes involving asset recognition and valuations, financial report disclosures, deferred tax assets and employee benefit provisions.

ASIC also issues 15 comment forms to auditors from 11 audit firms, setting out 42 findings from company audit surveillances where auditors do not sufficiently challenge management assumptions, gather enough evidence or document compliance with ethical, independence and quality management requirements. The auditors propose remediation steps, and ASIC says it will monitor and report on progress in 2026-27.

Impact on major firms and enforcement agenda

ASIC says it now attributes audit surveillance findings to large audit firms by name, a shift O’Rourke says is intended to improve transparency and accountability for investors, directors and other stakeholders. The regulator also asks the six largest audit firms, BDO, Deloitte, Ernst & Young, Grant Thornton, KPMG and PwC, to undertake self-assessments and prepare action plans to address firm-specific findings and issues identified in Report 817 on auditor independence and conflicts of interest.

The agency says it will monitor whether those plans deliver meaningful and lasting improvements to independence practices. Financial reporting and auditor misconduct remain key ASIC enforcement priorities in 2026, with the regulator warning it is taking stronger action where companies and auditors fail to meet their obligations.

Since 1 July 2025, ASIC says it has started Federal Court proceedings against three auditors and two related authorised audit companies over alleged serious audit failures. It also says disciplinary action leads to the cancellation of two auditors’ registrations and the suspension of one registration, while three auditors voluntarily cancel their registrations following independence concerns.

On the corporate side, ASIC says it issues more than $9 million in infringement notices to companies for failing to lodge financial reports, and court action results in convictions and penalties of more than $1.6 million for breaches of financial reporting and company officer obligations. In 2026-27, the regulator says it will continue surveillance of companies and RSEs and expand that work to managed investment schemes.

In our earlier article on AI agents in large U.S. companies, we discussed survey findings suggesting the technology is delivering incremental efficiency and growth gains, even if few executives yet view it as truly transformational. We also noted that companies expect AI to drive continued hiring, retraining, and sustained investment, underscoring the governance and operational discipline needed as AI becomes more embedded in core workflows.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.