ASIC Financial Reporting Focus Areas 2026-27: Impairment, Property, and Auditor Independence in Australia

Every year, the Australian Securities and Investments Commission (ASIC) publishes its financial reporting and audit focus areas for the coming financial year, signalling to directors, preparers, and auditors where regulatory scrutiny will be most intense. For the 2026-27 financial year, ASIC has identified asset impairment, property sector valuations, provisions for decommissioning costs, and auditor independence as its primary areas of concern. Understanding these focus areas — and choosing an auditor who takes them seriously — is essential for any Australian company required to lodge financial reports.

Understanding ASIC's Financial Reporting Surveillance Program

ASIC's financial reporting surveillance program is one of the most important mechanisms for maintaining the integrity of Australian capital markets. Each year, ASIC reviews a selection of financial reports lodged by listed and unlisted companies, registrable superannuation entities (RSEs), and managed investment schemes (MISs) to assess compliance with Australian Accounting Standards and the Corporations Act 2001.

For 2026-27, ASIC has announced it will review 25 audit files. The selection process is risk-based, targeting files where there is a higher risk of material misstatement, where a material correction has already occurred, or where internal or external data — such as concerns about auditor independence — indicates a potential quality risk. A proportion of files will also be selected randomly to ensure broad coverage.

ASIC's surveillance findings are not merely academic. Where ASIC identifies deficiencies, it can require companies to restate financial reports, refer matters to the Companies Auditors Disciplinary Board (CADB), or take enforcement action against directors and auditors. The reputational and financial consequences of an adverse ASIC finding can be severe.

Key Focus Area 1: Asset Impairment Testing

Asset impairment remains ASIC's most consistent area of focus, and 2026-27 is no exception. ASIC has specifically called on directors to conduct rigorous impairment testing for non-financial assets, including goodwill and indefinite-life intangible assets, in light of prevailing economic conditions.

Goodwill and Intangible Assets

Goodwill and indefinite-life intangible assets must be tested for impairment at least annually under AASB 136 Impairment of Assets. ASIC's concern is that some companies are using overly optimistic assumptions — particularly regarding discount rates, growth rates, and cash flow projections — to avoid recognising impairment losses that are economically warranted.

ASIC expects directors to use reasonable, supportable assumptions that reflect current market conditions. Where impairment indicators exist for other assets — such as declining revenues, rising interest rates, or adverse market developments — directors must assess whether those assets are also impaired, even if they are not subject to mandatory annual testing.

Right-of-Use Assets

ASIC has also flagged the impairment of right-of-use assets as an area of concern. Under AASB 16 Leases, lessees recognise right-of-use assets on their balance sheets. Where the underlying leased asset has declined in value — for example, commercial office space that is no longer fully utilised due to hybrid working arrangements — the right-of-use asset may also be impaired. ASIC expects companies to assess this carefully and disclose their conclusions transparently.

Key Focus Area 2: Property and Construction Sector Valuations

The property and construction sector has attracted specific attention from ASIC in 2026-27, reflecting the significant pressures facing commercial and retail property markets. ASIC requires directors of property-exposed entities to consider a range of factors that may adversely affect asset values.

• Online shopping trends — The continued growth of e-commerce is affecting the demand for and value of retail property assets. Directors must assess whether their retail property valuations adequately reflect current and projected tenant demand.
• Hybrid working and office space — The evolution of workplace practices has materially affected demand for commercial office space in many Australian cities. ASIC expects directors to consider the impact of changing tenant requirements on office property valuations.
• Tenant financial condition — The financial health of tenants directly affects the reliability of rental income streams and, therefore, property valuations. Directors must assess the credit quality of their tenant base and reflect any deterioration in their valuations.
• Lease accounting compliance — ASIC will specifically review whether entities are correctly applying AASB 16 to their property leases, including the recognition of right-of-use assets and lease liabilities, and the assessment of lease modifications and renewals.

Key Focus Area 3: Provisions for Decommissioning and Site Restoration

ASIC has identified provisions for decommissioning and site-restoration costs as a specific area of focus for 2026-27, following the release of new guidance in Illustrative Example D of AASB 137 Provisions, Contingent Liabilities and Contingent Assets.

This focus area is particularly relevant for companies in the resources, energy, and infrastructure sectors, where decommissioning obligations can represent material liabilities. ASIC will review whether companies are correctly measuring these provisions — including the discount rate applied, the estimated timing of cash flows, and the assumptions underlying cost estimates — and whether disclosures are sufficiently transparent to allow users of financial statements to understand the nature and magnitude of the obligation.

Companies that have historically used overly conservative assumptions to minimise the carrying value of decommissioning provisions should review their estimates in light of the new AASB 137 guidance and current market conditions.

Key Focus Area 4: Auditor Independence and Conflict of Interest

ASIC's Report 817, Building trust: Auditors' compliance with independence and conflict of interest obligations, identified significant deficiencies in how some audit firms manage independence risks. For 2026-27, ASIC is actively engaging with the six largest audit firms to monitor their responses to the report's findings.

The independence requirements for registered company auditors are set out in the Corporations Act 2001 and the APES 110 Code of Ethics for Professional Accountants. Key independence obligations include mandatory auditor rotation for listed companies and certain other regulated entities, restrictions on the provision of non-audit services to audit clients, and requirements to identify and manage financial, business, and personal relationships that may compromise independence.

ASIC's surveillance has found that administrative failures — including the failure to pay levies and lodge annual statements — account for a significant proportion of enforcement actions against registered company auditors. While these may appear to be minor administrative matters, they can result in referral to the CADB and, in serious cases, suspension or cancellation of registration.

Australian Regulatory Context

ASIC's financial reporting surveillance program operates within a broader regulatory framework that includes the Australian Accounting Standards Board (AASB), the Auditing and Assurance Standards Board (AUASB), and the Financial Reporting Council (FRC). Together, these bodies set the standards that Australian companies and their auditors must follow.

The Australian National Audit Office (ANAO) conducted a performance audit of ASIC's regulation of registered company auditors in 2025-26, finding that while ASIC has fundamental regulatory components in place, its approach is considered "partly effective." ASIC has agreed to implement new measures to report on regulatory outcomes and to improve the follow-through of remedial actions identified during surveillance activities. This signals a more rigorous and data-driven approach to audit oversight in the coming years.

For companies subject to mandatory sustainability reporting — including Group 1 entities (from 1 January 2025) and Group 2 entities (from 1 July 2026) — ASIC is also focusing on the quality of climate-related disclosures and the assurance provided by auditors. Auditors engaged to provide limited assurance on sustainability reports must be familiar with ASSA 5000 and the AUASB's guidance on sustainability assurance engagements.

Questions to Ask When Choosing an Auditor

In light of ASIC's 2026-27 focus areas, the following questions will help you assess whether a prospective auditor has the expertise and rigour to meet regulatory expectations.

• How do you approach impairment testing for goodwill and indefinite-life intangibles, and what assumptions do you typically challenge?
• Are you familiar with ASIC's 2026-27 focus areas, and how do they affect your audit approach for our industry?
• How do you assess the independence of your engagement team, and what processes do you have in place to identify and manage conflicts of interest?
• Have you conducted audits of property or construction sector entities, and how do you approach the valuation of commercial and retail property assets?
• Are you registered with ASIC as a Registered Company Auditor, and are your annual statement obligations current?
• If we are subject to mandatory sustainability reporting, are you qualified to provide assurance under ASSA 5000?

How MyMoney® Can Help

Choosing the right auditor is one of the most important governance decisions an Australian company can make. In an environment where ASIC is intensifying its surveillance and enforcement activities, the quality and independence of your auditor directly affects your regulatory risk profile and the credibility of your financial statements.

MyMoney® connects Australian businesses with qualified auditors who have demonstrated expertise in the areas that matter most — including impairment testing, property sector valuations, and ASIC compliance. Rather than relying on existing relationships or word of mouth, you can post a brief describing your audit requirements and receive competing proposals from auditors who have the specific skills and experience your organisation needs.

To get started, post a brief on MyMoney® and describe your audit requirements, including your industry, entity size, and any specific regulatory obligations. You can also browse qualified auditors on our platform to find professionals with the expertise to navigate ASIC's 2026-27 focus areas. Engaging the right auditor early in the financial year gives you the best opportunity to address any reporting issues before they attract regulatory attention.