23-343MR ASIC highlights focus areas for 31 December 2023 reporting

In its present announcement 23-343MR, ASIC underscores the significance of considering uncertain market and economic conditions in financial reporting for the full and half-years ending 31 December 2023. Derived from Report 774 (Annual financial reporting and audit surveillance report 2022–23), key findings shape the focus areas, encompassing impairment and asset values, provisions, post-year-end events, financial report and operating and financial review (OFR) disclosures, and the impact of a new accounting standard for insurers.
Indeed, Report 774 outlined ASIC’s findings from their financial reporting and audit surveillance program for the period 1 July 2022 to 30 June 2023 (surveillance period). ASIC embraced an integrated approach targeting the entire financial reporting chain. The focus was to furnish relevant stakeholders with information for enhancing financial reporting and audit quality. Surveillance criteria now include changes in financial information or reports, reflecting concerns over potential material misstatement risks. Oversight extends to 29,000 entities, including 1,900 ASX-listed and over 27,000 unlisted entities, alongside 3,200 registered company auditors. The review covered 180 financial reports and 15 audit files, employing a risk-based selection. ASIC remains committed to robust enforcement, citing instances of convictions, charges, and suspensions during the period, underscoring non-compliance consequences with auditing standards and the Corporations Act 2001.
ASIC Commissioner Kate O’Rourke emphasizes directors‘ responsibility to furnish investors with pertinent information regarding the effects of evolving economic and market conditions on their company’s financial position and future performance. Directors are urged to allocate adequate resources and expertise to ensure the reporting process’s quality, validating assumptions supporting estimates for financial reporting purposes as reasonable and defensible. Auditors, occupying a crucial role in the financial reporting cycle, are advised to concentrate professional judgement and skepticism on areas reliant on estimates and marked by uncertainty, playing a pivotal role in maintaining market integrity.
The disclosure in financial reports regarding uncertainties, key assumptions, and sensitivity analysis holds significance for investors, as uncertainties may lead to diverse judgements on asset values and other estimates. Directors and management are directed to assess the potential impact of changing circumstances, uncertainties, and risks on the current and future performance of the entity, asset values, provisions, and business strategies.
Furthermore, ASIC emphasizes the dynamic nature of uncertainties, stressing the importance of documenting and updating information supporting judgements, considering potential fluctuations in uncertainties from one period to another. Detailed information about ASIC’s specific focus areas for reporting as of 31 December 2023 can be accessed on ASIC’s financial reporting and audit page.