ASIC focus areas for FY 2025-26 financial reports

INTRODUCTION

This Alert summarises the Australian Securities and Investments Commission’s (ASIC) Media Release 25-079MR ASIC announces financial reporting and audit focus areas for FY 2025–26, published on 19 May 2025.

ASIC Commissioner Kate O’Rourke 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.”

This Alert is heavily based on 25-079MR as issued by ASIC and accessed on 19 May 2025. It includes additional commentary and guidance to assist preparers, directors, and auditors in meeting ASIC’s expectations.

OVERVIEW

The Media Release highlights ASIC’s continued emphasis on financial reporting elements that require significant judgement, particularly in light of recent capital market volatility.

ASIC’s financial reporting and audit surveillance programs review financial reports and audit engagements from their regulated entities, including:

• public listed companies;
• other economically significant public interest entities e.g., large proprietary companies;
• grandfathered entities, and
• registered superannuation funds.

The key focus areas include:

• revenue recognition;
• asset valuation; and
• estimation of provisions.

These items are explored in more detail in the Appendix to this document.

ASIC will also expand its audit surveillance activities and continue its integrated approach to selecting audit files based on risk indicators, changes to financial reports, and random sampling.

For 2025-26, ASIC will review an increased number of audit files. As part of ASIC’s integrated approach, ASIC will continue to select audit files where a change has been made to financial information or the financial report, or where ASIC has concerns that a financial report may have a risk of material misstatement.

In 2025-26, ASIC will also review a random selection of audit files from their regulated population.

Sustainability reporting in accordance with AASB S2 Climate-related disclosures will be 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 have not already implemented plans and procedures to meet the mandatory reporting requirements.

ASIC will review 31 December 2025 sustainability reports as part of their 2025-26 program and will share their observations with the market to assist preparers. ASIC will take a proportionate and pragmatic approach to supervision and enforcement as the sustainability requirements are being phased in.

Preparers of sustainability disclosures should refer to Regulatory Guide 280 Sustainability reporting (RG 280) for more information.

Additionally, ASIC has updated INFO 284 to reflect legislative amendments regarding:

• tax residency disclosures for entities in multiple jurisdictions
• clarification of “Australian resident” status for consolidated entity disclosure statements

These updates apply to annual financial reports for periods beginning on or after 1 July 2024.

THE REPORTING PROCESS

Directors are primarily responsible for the quality of the financial report. This includes ensuring that management produces quality and timely financial information for audit, supported by robust position papers with appropriate analysis and conclusions referencing relevant accounting standards. Companies must have appropriate processes, records and analysis to support information in the financial report.

Appropriate experience and expertise should be applied in the reporting and audit processes, particularly in more difficult and complex areas, such as asset values, provisions and other estimates.

The circumstances in which judgements on accounting estimates and forward-looking information have been made, and the basis for those judgements, should be properly documented at the time and disclosed as appropriate.

ASIC will review the full-year financial reports of selected listed entities and other public interest entities for each reporting period. This includes a sample of financial reports from the group of large proprietary companies that were formerly exempt from lodging audited financial statements with ASIC (grandfathered companies) but are now required to lodge and registerable superannuation funds. 

The Operating and Financial Review (OFR) should complement the financial report and tell the story of how the entity’s businesses are performing. The underlying drivers of the results and financial position should be explained, as well as risks, management strategies and future prospects. Forward-looking information should have a reasonable basis and the market should be updated through continuous disclosure if circumstances change. Further guidance can be found in ASIC’s Regulatory Guide 247 Effective disclosure in an operating and financial review.

Audit fees should be reasonable and have regard to any increased costs for auditors and additional audit effort required in judgement areas.

ASIC SURVEILLANCE

Registrable superannuation entities (RSEs) surveillance

Following the requirement for RSEs to lodge audited financial reports for the first time in 2024, ASIC are finalising their review of around half of all lodged RSE financial reports and five RSE audit files.

For ASIC’s 2025-26 program, they will review the other half of the RSE financial reports as well as a selection of RSE audit files.

Focus areas for RSE financial reports include:

• the measurement and disclosure of investment portfolios, and
• disclosure of marketing and advertising expenses.

Financial reports from grandfathered entities surveillance

In 2022 the financial report lodgement exemption for grandfathered entities was lifted. ASIC now monitors 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 ASIC find non-lodgement of financial reports, they will follow up with the company and, if necessary, take appropriate legal action.

‘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,’ Ms O’Rourke said.

Auditor conflicts of interest surveillance

ASIC is progressing its proactive, large scale surveillance focused on auditor’s compliance with their independence and conflicts of interest obligations under the Corporations Act 2001.

ASIC encourages auditors to self-identify and self-report non-compliance with their independence and conflicts of interest obligations through their 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,’ Ms O’Rourke said.

FURTHER INFORMATION

For further discussion or clarification, please contact your local Grant Thornton Australia representative or the National Assurance Quality Team at national.assurance.quality@au.gt.com.