media release (24-240MR)

ASIC releases FY 2023–24 financial reporting and audit report and launches auditor independence surveillance

Published

ASIC has today released findings from its financial reporting and audit surveillance for the 12 months to 30 June 2024, and announced a proactive surveillance focused on auditors’ compliance with independence and conflicts of interest requirements.

ASIC Commissioner Kate O’Rourke said: ‘Auditors play an important role in our capital markets and in decisions in our economy relying on the financial information produced by entities of economic significance.

‘ASIC is committed to enhancing the integrity and quality of financial reporting and auditing in Australia, and we have evolved our regulatory approach to this important part of our work.’

Report 799 ASIC’s oversight of financial reporting and audit 2023–24 (REP 799) outlines findings related to disclosure of material business risks in the operating and financial review, impairment of assets, revenue recognition and other financial report disclosures from 1 July 2023 to 30 June 2024.

The report also highlights ASIC’s enforcement actions against registered company auditors, outcomes relating to company financial reports and provides insights from our review of audit firms’ implementation of quality management frameworks.

ASIC’s financial reporting and audit surveillances focused on financial reports which may have a higher risk of misstatements or inadequate disclosure. We reviewed 188 financial reports and 15 related audit files at 11 audit firms.

As a result of ASIC’s review:

  • we had findings in 25 financial reports, which resulted in entities making adjustments of $1,886 million. Of the 25 entities, 16 also made, or agreed to make, changes to their operating and financial review disclosures.
  • we restricted one entity from issuing a reduced-content prospectus until 21 May 2025 after finding they had not complied with the requirements of AASB 136 Impairment of assets.
  • we had findings in 12 audit surveillances at nine audit firms and notified both the auditor and company of those findings in order to drive improved practices.

ASIC’s enforcement action against registered company auditors includes:

  • the first infringement notices issued for alleged breaches of audit rotation requirements
  • a court enforceable undertaking accepted by ASIC in relation to independence breaches
  • Companies Auditors Disciplinary Board (CADB) proceedings resulting in suspension of an auditor’s registration for a year for failing to comply with auditing standards, and
  • CADB proceedings resulting in an order that an audit partner undertake not to perform audit duties for a period. The auditor was unable to audit for a period of seven months.

ASIC has also today written to auditors and CEOs of large audit firms to advise that we are commencing a proactive surveillance focused on compliance with auditor independence and conflicts of interest requirements. This will include wide-ranging engagement with auditors using our compulsory information-gathering powers and may also extend to seeking information about the systems and controls relied upon in audit engagements to ensure compliance with their independence and conflicts of interest requirements.

‘Our surveillance will focus on the behaviour of auditors, particularly in how they comply with independence and conflicts of interest obligations.  ASIC is using new regulatory approaches as we continue to evolve and improve our program designed to enhance the integrity and quality of auditing in Australia,’ Ms O’Rourke said.

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Background

ASIC’s financial reporting and audit surveillance program focusses on financial reports and audits of listed entities, significant public interest entities or other unlisted entities of interest. The surveillances of audit files cover firms that audit the financial reports of listed entities and other public interest entities.