ASIC’s FY2026–27 priorities cover audit quality, climate disclosure, financial reporting judgements, and compliance obligations in Australia.
Audit Quality and Climate Disclosure Become Key Regulatory Themes
Source: Australian Securities and Investments Commission media release 26-098MR; published on 18 May 2026.
The Australian Securities and Investments Commission (ASIC) announced its regulatory priorities for financial reporting, audit, and sustainability reporting for FY2026–2027 on 18 May 2026. The financial year covers the period from 1 July 2026 to 30 June 2027. Unlike a standalone review of financial statements, this round of regulatory arrangements shows that the Australian regulator will advance financial reporting quality, audit independence, climate-related disclosure, and lodgement compliance management at the same time, bringing company directors, superannuation trustees, audit firms, and sustainability reporting teams within its regulatory focus.
Based on the announcement, ASIC’s regulatory plan for the new financial year is not limited to whether accounting line items are presented correctly. It also places greater emphasis on whether entities can explain the basis for key judgements. Revenue recognition, asset impairment, financial instrument measurement, restoration cost provisions, audit remediation measures, and climate reporting assurance approaches are all placed within the same regulatory framework. This means disclosure requirements in Australia’s capital markets are extending from traditional financial reporting to broader governance and risk explanations.
“Our regulatory program highlights the importance of high-quality reporting and audits. Reliable financial information is essential to the transparency of Australia’s capital markets and to investors making informed investment decisions.”
Companies Need to Evidence the Basis for Significant Accounting Judgements
ASIC stated that in FY2026–2027 it will continue to monitor areas where financial report preparers are required to make significant judgements. Regulatory priorities include revenue recognition, asset impairment assessments, and the recognition and measurement of financial instruments. These areas typically involve assumptions, estimates, and management judgement, and the resulting accounting treatments directly affect corporate profit, asset values, liability levels, and investors’ assessment of operating quality.
In terms of review targets, ASIC will cover listed companies, unlisted companies, registrable superannuation entities (RSE), and managed investment schemes (MIS). This indicates that the regulatory focus is not limited to publicly listed companies, but also includes superannuation and investment schemes that affect the public interest. For entities holding unlisted assets, long-term assets, or complex financial instruments, valuation bases, impairment testing models, and disclosure quality will become key matters in the financial reporting preparation process.
Revenue recognition will focus on whether transaction arrangements, performance obligations, variable consideration, and the timing of revenue recognition reflect economic substance.
Asset impairment will focus on goodwill, intangible assets, property assets, and long-term assets that are more significantly affected by changes in the economic environment.
Financial instruments will focus on whether classification, measurement, fair value judgements, and expected credit loss estimates are supported by sufficient evidence.
Disclosure documents will focus on whether key assumptions, estimation uncertainty, and sensitivity analyses reflect the entity’s own circumstances.
ASIC will also review disclosures by entities that have recognised provisions for decommissioning and site restoration costs. The relevant review will refer to new guidance issued by the Australian Accounting Standards Board (AASB), including Example D inAASB 137: Provisions, Contingent Liabilities and Contingent Assets. For mining, energy, infrastructure, and resource development companies, restoration cost provisions are typically linked to long-term liabilities, environmental obligations, and discount rate assumptions. Insufficient disclosure may affect investors’ assessment of future cash flow pressure on the entity.
| Regulatory Direction | Announcement Date | Main Targets | Regulatory Implication |
|---|---|---|---|
| Financial report reviews | 18 May 2026 | Listed companies, unlisted companies, RSEs, MISs | Requires entities to explain significant judgements in revenue, impairment, and financial instrument measurement |
| Audit file inspections | FY2026–2027 | Audit firms and their audit engagements | Inspection of 25 audit files and follow-up on the implementation of remediation measures |
| Lodgement compliance supervision | FY2026–2027 | Large proprietary companies and registered company auditors | Focus on failure to lodge financial reports and auditors’ annual statement lodgement obligations |
| Sustainability reporting | From 2026 | Group 1 entities and large audit firms | Review of mandatory climate reporting, with attention to assurance approaches and disclosure quality |
Audit Firms’ Remediation Responsibilities Are Further Clarified
In relation to audit, ASIC will review 25 audit files in FY2026–2027. The regulator will continue to focus on listed companies, unlisted companies, and RSEs, while also including selected MISs. Audit files will be selected through both risk indicators and random procedures, including engagements involving financial reports with material restatements or potential material misstatements, as well as engagements flagged by internal or external data for audit quality risks.
The announcement shows that threats to audit independence will also be a factor in file selection. For audit firms, the regulatory focus is not only whether an audit opinion has been issued, but also whether audit evidence is sufficient, whether professional scepticism has been applied, whether key judgements have been reviewed, and whether firm-level independence and conflict-of-interest management are effective.
When a financial report contains a material restatement, or ASIC considers that the report may contain a material misstatement, the related audit file may be selected for inspection.
When regulatory data, external information, or independence risks indicate audit quality issues, the related audit engagement may fall within the inspection scope.
ASIC will also use random selection procedures to identify audit quality issues in non-targeted samples.
ASIC requires audit firms to explain the remedial actions they intend to take when responding to inspection findings. In FY2026–2027, the regulator will monitor and report on audit firms’ implementation of remediation measures. At the same time, ASIC is engaging with the six largest audit firms to understand their firm-level actions in response toReport 817: Building trust: Auditors’ compliance with independence and conflict of interest obligations.
Climate Reporting Moves from Framework Development to Review Stage
Sustainability reporting is a new source of pressure in this round of regulatory arrangements. ASIC stated that it has supported entities in complying with the sustainability reporting framework through guidance, exemptions, and educational materials, and has updated frequently asked questions on sustainability reporting reviews and audits. The regulator also continues to update the exemption decisions register and has published initial observations on sustainability reports already lodged to help preparers with 30 June reporting periods prepare their first reports.
In its sustainability reporting supervision statement, ASIC said it will begin reviewing sustainability reports lodged with ASIC from 2026, with the review approach broadly following the financial reporting review model. The regulator also has direction powers; if it considers that a statement in a sustainability report is incorrect, incomplete, or misleading, it may require the entity to confirm, explain, supplement, correct, or publish a corrected statement.
Sustainability reports submitted by Group 1 entities will become a key focus in the administration of the mandatory climate reporting framework.
The assurance approaches of large audit firms will receive attention, and those approaches need to support the reliability of reported information.
The government proposed in the budget to launch reform consultations aimed at reducing the reporting burden while maintaining the core requirements.
Before any reforms are implemented, ASIC will continue to be responsible for administering the mandatory climate reporting framework.
This arrangement shows that climate-related financial disclosure has entered the stage of regulatory enforcement and quality improvement. Companies cannot rely solely on broad, principles-based wording to describe climate risks; they also need to demonstrate risk identification, scenario analysis, governance processes, data sources, and reporting boundaries. For entities submitting sustainability reports for the first time, consistency among report content, board governance, internal controls, and external assurance will directly affect regulatory review outcomes.
Lodgement Obligations of Large Proprietary Companies Remain Under Scrutiny
In terms of compliance activities, ASIC will continue to focus on large proprietary companies that fail to lodge financial reports. Failure to lodge financial reports weakens the ability of the market and creditors to assess a company’s financial position and also affects the completeness of public information within Australia’s corporate regulatory system. ASIC will also review whether registered company auditors have complied with their obligation to lodge annual statements, treating the obligation as a basic requirement supporting audit quality and auditor capability.
ASIC also published three reports in 2025 related to this round of regulatory arrangements, includingReport 816: ASIC’s review of superannuation funds’ financial reporting and audit,Report 817: Building trust: Auditors’ compliance with independence and conflict of interest obligations, andReport 819: ASIC’s financial reporting and audit surveillance 2024–25. These reports cover the supervision program and supplementary work conducted from 1 July 2024 to 30 June 2025 and indicate that there is still room for improvement in financial reporting and audit quality.
From a corporate governance perspective, ASIC’s FY2026–2027 regulatory priorities will increase the need for coordination among internal finance, legal, audit committee, and sustainability disclosure teams. Directors and trustees need to ensure that the process for forming significant accounting judgements is documented, audit firms need to demonstrate the effectiveness of their audit evidence and independence controls, and sustainability reporting preparers need to incorporate climate disclosures into more robust reporting processes.
Questions on Australian Reporting Regulation
What is the core change in ASIC’s new financial year regulatory priorities?
The core change is that the regulatory focus now covers financial reporting, audit quality, and sustainability reporting at the same time. Companies not only need to submit reports, but also need to explain the basis for significant judgements, audit remediation progress, and the reliability of climate disclosures.
What inspections will audit firms face in FY2026–2027?
ASIC plans to review 25 audit files, with samples drawn from financial reports involving material restatements or potential misstatements, data indicating audit quality risks, and random selection procedures.
Why has sustainability reporting been included as a regulatory priority?
Australia’s mandatory climate reporting framework is being implemented. From 2026, ASIC will begin reviewing lodged sustainability reports for the first time and will focus on the reporting quality of Group 1 entities and the assurance approaches of large audit firms.
What compliance matters should large proprietary companies focus on?
Large proprietary companies need to lodge financial reports as required. ASIC will continue to focus on failures to lodge financial reports and will review registered company auditors’ compliance with annual statement lodgement obligations.
