‘Improvement is needed:’ ASIC review finds audit quality, independence concerns

On Friday (31 October), ASIC released findings from its 2024–25 audit surveillance program, which identified concerns regarding the quality of financial reports and audits, and called on auditors to be more proactive in reporting breaches and addressing independence issues.

“ASIC’s expanded program of work revealed that improvement is needed in delivering higher-quality financial reports and audits, and for auditors to be more proactive in ensuring their independence and in reporting significant contraventions to ASIC,” ASIC commissioner Kate O’Rourke said.

Reliable financial information has become increasingly crucial as entities with unlisted assets, such as super funds and private credit funds, have played a larger role in the Australian economy, ASIC said.

Its 2024–25 surveillance program reviewed 254 company financial reports, 10 audit files at eight firms, and included 22 surveillances. Following its review, 18 entities made or agreed to make changes to their financial reports relating to 19 areas of concern raised by ASIC.

For example, Bell Group made a restatement to consolidate a controlled subsidiary, which had previously been incorrectly accounted for as an associate. Furthermore, Energy World Corporation impaired its assets by a total of $793.8 million.

Of the 18 entities that made changes, 12 agreed to amend their operating and financial review to improve business risk disclosures in their next financial report.

ASIC also identified “audit and other findings” in nine audit surveillances at eight firms, and notified both the auditors and companies to drive better audit practices.

Throughout its review process, ASIC also launched enforcement action against a handful of registered company auditors, resulting in suspensions and audit registration cancellations.

The Companies Auditors Disciplinary Board (CADB) proceedings against company auditor Joseph Santangelo resulted in an 18-month suspension, after he failed to comply with auditing standards.

The regulator said it would continue to engage with the audit industry and expand its scrutiny of financial reporting and audit practices.

In its 2025-26 surveillance program, ASIC said it would increase the number of audit files under review to 25 and enhance its selection process. It would also review sustainability reports for the year ended 31 December 2025, and share observations with the market to assist preparers.

Finally, it said it would continue to use its full range of regulatory tools to enhance audit quality and take enforcement action where appropriate.

“Accurate, accessible and reliable financial information is essential for business and markets to work well,” O’Rourke said.

“All participants in our economy rely on those preparing financial information to do so carefully and fairly, and those auditing that information to do so with skill, professionalism and independence.”