ASIC finds persistent financial reporting and audit shortcomings, names large firms in surveillance findings

The Australian Securities and Investments Commission (ASIC) has published its 2025–26 financial reporting and audit surveillance results, finding continued failures to challenge significant judgments on revenue recognition, impairment and asset valuations. Company audit surveillance produced 42 findings across 11 audit firms, involving inadequate challenge of management assumptions, insufficient supporting evidence and poor documentation of compliance with ethical, independence and quality management requirements. The report attributes audit surveillance findings to large firms by name. ASIC reviewed 353 financial reports and expanded audit surveillance to 25 files across 12 firms, compared with 15 files in 2024–25. Following its intervention, 10 companies made or agreed to improve disclosures of material business risks in their operating and financial reviews. Companies also made or agreed to accounting and disclosure changes, including corrections to asset recognition and valuations. The concerns over significant judgments echo ASIC’s separate superannuation review, which identified persistent weaknesses in trustees’ and auditors’ scrutiny of unlisted investment valuations. In 2026–27, ASIC will monitor and report on auditors’ proposed remedial actions. It will also assess the effectiveness of independence action plans requested from the six largest audit firms, addressing their individual findings and ASIC’s earlier review of independence and conflicts of interest. Auditors are expected to obtain stronger evidence, challenge management assumptions and document their conclusions. As previously flagged, financial reporting and audit surveillance will extend to managed investment schemes in 2026–27.