26-260MR ASIC surveillance shows financial reporting and audit quality continues to fall short

ASIC has called for improvements in financial reporting and audit quality after its latest surveillance found preparers of financial reports and auditors are still not getting the fundamentals right.

ASIC Commissioner Kate O’Rourke said preparers of financial reports and auditors need to lift their performance, particularly when financial reports depend heavily on judgement.

‘Our surveillance found that some report preparers and auditors did not challenge significant judgements, including for revenue recognition, impairment and asset valuations.

‘Getting these areas right is essential to providing investors with information they can rely on. Auditors need to be independent, obtain stronger evidence, challenge management assumptions and document their conclusions,’ Ms O’Rourke said.

‘This year we have attributed audit surveillance findings to large audit firms by name. Greater transparency helps investors, directors and other stakeholders better understand where audit quality concerns arise and strengthens accountability across the profession.’

ASIC’s findings are published in Report 842 ASIC’s oversight of financial reporting and audit 2025-26 (REP 842).

In 2025-26, ASIC:

  • reviewed 353 financial reports comprising 311 companies and 42 registrable superannuation entities (RSEs)
  • conducted financial reporting surveillances of 30 companies, and
  • expanded its audit surveillance program to 25 audit files of 19 companies and 6 RSEs across 12 audit firms, compared to 15 audit files in 2024-25.

The findings from ASIC’s surveillance of super fund financial reports and audits were published separately in Report 841 Accounting for your super: Super fund financial reporting and audit 2025–26 (REP 841).

As a result of concerns raised by ASIC, ten companies made or agreed to improve the disclosure of material business risks in their operating and financial reviews. Companies also made or agreed to make changes to asset recognition and valuations, financial report disclosures, deferred tax assets and employee benefit provisions.

ASIC issued 15 comment forms to auditors from 11 audit firms setting out 42 findings from its company audit surveillances where auditors did not challenge management assumptions, obtain sufficient evidence to support their conclusions and document their compliance with ethical, independence and quality management requirements.

The auditors proposed actions to remediate our findings and, in 2026-27, we will monitor and report on the outcomes and status of these remedial actions.

ASIC also requested the six largest audit firms (BDO, Deloitte, Ernst & Young, Grant Thornton, KPMG and PwC) undertake self-assessments and develop action plans to address their individual firm findings, and ASIC’s findings and calls to action in Report 817 Building trust: Auditors’ compliance with independence and conflict of interest obligations (REP 817).

ASIC will monitor the effectiveness of their action plans and continue to focus on embedding and strengthening these independence practices.

‘Audit firms now need to demonstrate that their action plans are producing meaningful and lasting improvements to independence practices,’ Ms O’Rourke said.

Financial reporting and auditor misconduct are key ASIC enforcement priorities in 2026, with ASIC taking stronger action where companies and auditors fail to meet their obligations.

Since 1 July 2025, ASIC has taken enforcement and compliance action including:

  • commencing Federal Court proceedings against three auditors and two related authorised audit companies, alleging serious audit failures
  • making Company Auditor Disciplinary Board applications resulting in the cancellation of two auditors’ registrations and the suspension of one auditor’s registration
  • accepting the voluntary cancellations of three auditors’ company auditor registrations following independence concerns
  • issuing over $9 million in infringement notices to companies for failing to lodge their financial reports, and
  • court action resulting in convictions and penalties of more than $1.6 million against companies for breaching financial reporting and company officer obligations.

In 2026-27, ASIC will continue its financial reporting and audit surveillance of companies and RSEs and expand it to include managed investment schemes. Preparers and auditors should refer to our 2026–27 financial reporting, audit and sustainability focus areas.

Audit firms included in ASIC’s review

  • BDO
  • Deloitte
  • Ernst & Young
  • Grant Thornton
  • Hall Chadwick
  • HLB Mann Judd
  • KPMG
  • L Audit
  • MGI Sydney Assurance Services
  • PricewaterhouseCoopers (PwC)
  • RSM Australia
  • SW Audit

Downloads

  • Report 842 ASIC's oversight of financial reporting and audit 2025-26 (REP 842)