ASIC focus to improve investor confidence and knowledge

In May 2024, ASIC published its Focus Areas for the 30 June 2024 reporting season, giving priority to educating and building the confidence of investors.

ASIC focus areas are now classified as either:

• Enduring focus areas, or
• Particular focus areas.

ASIC highlighted financial reporting areas which they have determined to be the most significant and common instances of non-compliance with accounting standards, as well as areas that are emerging as more challenging areas for preparers.

ASIC set out that Directors are primarily responsible for the quality of the financial report and that companies must have appropriate processes, records and analysis to support information in the financial report, including robust position papers with appropriate analysis and conclusions with appropriate accounting standard references, as well as producing quality and timely financial information for audit.

ASIC also set out that:

• The Operating and Financial Review (OFR) should complement the financial report and tell the story of how the entity’s businesses are performing
• The underlying drivers of the results and financial position should be explained, as well as risks, management strategies and future prospects
• Forward-looking information should have a reasonable basis and the market should be updated through continuous disclosure if circumstances change
• Audit fees should be reasonable and have regard to any increased costs for auditors and additional audit effort required in judgement area
• Preparers and auditors need to consider the impairment of lessee right-of-use assets
• ECLs should be a focus for companies in the financial sector and other sectors.

ASIC’s enduring focus

ASIC set out that ASIC’s enduring focus areas for directors, preparers and auditors and their financial report reviews are fairly consistent with previous reporting periods being:

• Asset values including: impairment of non-financial assets, values of property assets, expected credit losses (ECLs) on loans and receivables, financial asset classification, value of other assets
• Provisions including: onerous contracts, lease makegood provisions, mine site restoration, financial guarantees given and restructuring
• Subsequent events
• Disclosures including: general considerations, disclosures in the financial report, disclosures in the OFR, non-IFRS financial information, disclosure in half-year reports.

ASIC’s particular focus areas for June 2024

ASIC set out that ASIC’s particular focus areas for June 2024 are:

• ‘Grandfathered’ large proprietary companies - second year that large proprietary companies, which were previously exempt, are required to lodge audited financial reports with ASIC. Financial reports from these entities are now included in ASIC’s financial reporting and audit surveillance program
• Registrable Superannuation Entities for the first time, superannuation trustees are required to lodge audited financial reports for most registrable superannuation entities (RSEs) with ASIC. Trustees will need to lodge within three months of the end of the fund’s 2023-24 financial year.

ASIC’s other key comments

In announcing these Focus Areas, ASIC also outlined an expanded program of work to enhance the integrity and quality of financial reporting and auditing in Australia in achieving the broader goal of confident and informed investors.

With any queries whatsoever, please do not hesitate to reach out to your local PKF
Audit team.