ASIC flags financial reporting, audit focus areas for FY 25-26

ASIC has published its financial reporting and audit focus areas for the 2025–26 financial year as well as the progress of its current financial reporting and audit surveillance programs.

The Corporate Regulator said it would continue to focus on areas where significant judgment from preparers of financial reports was required. These focus areas included revenue recognition, asset valuation and estimation of provisions.

The regulator said it would review an increased number of audit files, as well as a “random selection” of audit files from the regulated population.

“As part of our integrated approach, we will continue to select audit files where a change has been made to financial information or the financial report, or where we have concerns that a financial report may have a risk of material misstatement,” ASIC said.

“In some instances, we select audit files based on other internal or externally available data.”

In addition to this, ASIC is also progressing its “proactive, large-scale” surveillance focused on auditors’ compliance with their independence and conflicts of interest obligations under the Corporations Act 2001.

ASIC Commissioner Kate O’Rourke encouraged auditors to self-identify and self-report non-compliance with their independence and conflicts of interest obligations through its regulatory portal.

“Based on our data model, we considered potential independence issues in relation to over 100 audit engagements before targeting nearly 50 auditors for a more detailed review. We intend to publish the outcomes of this surveillance later this year.”

For the first time in 2024, registrable superannuation entities (RSEs) were required to lodge audited financial reports with ASIC.

The corporate regulator said for the 2025–26 program, it would look to finalise its review of almost half of all lodged RSE reports and RSE audit files, as well as begin to review the other half of the RSE financial reports and a selection of RSE audit files.

The focus areas for these RSE financial reports include the measurement and disclosure of investment portfolios and the disclosure of marketing and advertising expenses.

ASIC added that in the next financial year, it would look to follow up companies that had not lodged financial reports from grandfathered companies, since the financial report lodgment exemption for grandfathered entities was lifted in 2022.

O’Rourke said that from 2022, ASIC monitored compliance of these financial reports with the legislative requirements and applicable accounting standards.

“Some of these companies have not lodged financial reports since the exemption was removed. Where we find non-lodgement of financial reports, we will follow up with the company and, if necessary, take appropriate regulatory action,” she said.

“Many of these previously grandfathered entities are large companies and should be lodging financial reports. If the auditor is aware that a company is not complying with its lodgement obligations, they should inform ASIC through the appropriate channels.”

ASIC also reminded organisations that sustainability reporting in accordance with AASB S2 Climate-related disclosures was now mandatory for Group 1 entities with financial years commencing on or after 1 January 2025 who:

• Are required to prepare an annual financial report under Chapter 2M of the Corporations Act,
• Meet certain sustainability reporting thresholds, and
• Have not obtained sustainability reporting relief from ASIC.

Impacted entities should begin work as soon as possible if they had not already implemented plans and procedures to meet the mandatory reporting requirements, ASIC said.

“We will review 31 December 2025 sustainability reports as part of our 2025-26 program and will share our observations with the market to assist preparers. We will take a proportionate and pragmatic approach to supervision and enforcement as the sustainability requirements are being phased in," said the corporate regulator.

O'Rourke said ASIC's surveillance programs across audit and financial reporting aim to enhance the integrity and quality of financial reporting and auditing in Australia.

"We expect all entities to provide reports and audits that are accurate, complete and informative," she said.