ASIC Intensifies Audit Oversight and Sustainability Reporting Initiatives for FY 2025-26
The Australian Securities and Investments Commission (ASIC) has announced its strategic focus for financial reporting and audit surveillance in the upcoming 2025–26 financial year. This initiative highlights ASIC’s commitment to enhance the quality of financial disclosures and auditing processes among the nation’s regulated entities, ensuring greater integrity and transparency within corporate Australia.
ASIC’s Commitment to Financial Reporting Standards
ASIC Commissioner Kate O’Rourke emphasized the importance of accurate and comprehensive financial reporting. She stated, “These surveillance programs 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.”
Key Areas of Focus for 2025–26
ASIC will concentrate on several critical areas of financial reporting, which include:
- Revenue Recognition
- Asset Valuation
- Estimating Provisions
These components are particularly vital as ongoing market volatility poses challenges to the reliability of forecasts and assumptions.
Enhanced Audit Program for Greater Oversight
In its audit program, ASIC plans to expand its review of audit files. The selection of these files will be based on:
- Changes in financial disclosures
- Identified risks of material misstatement
- Insights from internal and external intelligence
A random sampling of audit files will also be included in this comprehensive review.
Focus on Registrable Superannuation Entities
ASIC’s surveillance will extend to registrable superannuation entities (RSEs), which were mandated to submit audited financial reports starting in 2024. ASIC has already evaluated half of these reports and will continue its examination into the following year. There will be a particular emphasis on:
- Measuring and disclosing investment portfolios
- Reporting on marketing expenses
Monitoring Grandfathered Entities
ASIC will also oversee compliance among grandfathered entities—those previously exempt from reporting obligations—ensuring they adhere to newly reinstated financial report lodgment requirements. O’Rourke highlighted that many of these entities are large corporations that must fulfill their reporting duties.
Focus on Sustainability Reporting
Starting January 2025, large Group 1 entities will be required to disclose climate-related risks in accordance with the AASB S2 standard. ASIC aims to review these sustainability reports from December 2025, adopting a “proportionate and pragmatic” approach as the market adapts to these new requirements.
Auditor Independence Surveillance
ASIC continues to prioritize auditor independence, with plans to analyze over 100 audit engagements and target nearly 50 auditors. The results of this investigation are expected to be released later this year.
Updates on Tax Residency Disclosure
Lastly, ASIC has revised Information Sheet 284 to clarify tax residency disclosure obligations in public company reports. These changes will take effect for financial years commencing on or after July 1, 2024.
For further insights, you can read the full post on RegTech Analyst.
