CPA Australia acknowledges ASIC’s continued focus on audit and financial reporting quality

CPA Australia notes the release of ASIC’s annual oversight of financial reporting and audit report for 2024–25, and supports the regulator’s commitment to enhancing the integrity of Australia’s financial reporting system.

The report highlights key findings from ASIC’s audit surveillance program, including deficiencies in audit evidence, documentation, and compliance with independence requirements. CPA Australia welcomes ASIC’s transparency and the detailed insights provided into areas for improvement across the profession.

Audit quality remains a cornerstone of market confidence, and CPA Australia reiterates its support for robust regulatory oversight and continuous improvement in audit practices.

ASIC’s review of 10 audit files across nine firms identified audit findings in areas such as:

• Revenue recognition and receivables – insufficient evidence and lack of professional scepticism.
• Impairment and asset valuation – inadequate testing of assumptions and valuation inputs.
• Investments and financial instruments – deficiencies in ownership verification and consolidation assessments.
• Inventory and cost of goods sold – gaps in analytical procedures and cut-off testing.
• Employee benefits and loans – incomplete testing and going concern assessments.
• Audit documentation and quality management – issues with planning, supervision, and independence compliance.

CPA Australia notes ASIC’s enforcement actions, including the suspension and deregistration of auditors, and the imposition of conditions on audit registrations. These actions underscore the importance of accountability and adherence to professional standards.

CPA Australia also recognises ASIC’s concern regarding underreporting of auditor breach notifications, particularly in relation to independence. We encourage all auditors to remain vigilant and proactive in meeting their obligations under the Corporations Act and relevant standards.

“While the findings are largely a continuation of themes seen in prior years, rather than a revelation of new or emerging risks, they reinforce the need for sustained effort across the profession to improve audit quality,” said CPA Australia’s Audit & Assurance Lead, Tiffany Tan. “The profession has made progress, but there is more work to do.”

On the financial reporting side, ASIC’s observations around operating and financial reviews, non-IFRS profit measures, and impairment disclosures reflect ongoing areas of regulatory scrutiny. ASIC’s interventions led to changes in financial reports and disclosures for selected entities, but the nature of these changes is consistent with prior surveillance cycles.

CPA Australia supports ASIC’s continued emphasis on the role of directors, audit committees, and preparers in ensuring high-quality financial information. We also welcome the regulator’s call for audit firms to strengthen their internal processes and culture around audit quality.

“Improving audit and financial reporting outcomes is a shared responsibility,” said Ms Tan. “We encourage our members to engage with ASIC’s findings and use them as a prompt for continuous improvement.”

Looking ahead, CPA Australia supports ASIC’s expanded audit surveillance program for FY 2025–26, including increased file reviews and a mix of risk-based and random selection. We also welcome

ASIC’s continued focus on sustainability reporting and its pragmatic approach to enforcement during the transition to mandatory climate-related disclosures.

CPA Australia remains committed to working with regulators, firms and members to promote audit quality and uphold confidence in Australia’s financial reporting framework.

We will continue to provide guidance, education and advocacy to support the profession in meeting evolving expectations n the public interest.