ASIC Going Concern Assessments and Audit Quality Surveillance in Australia 2026-27

The Australian Securities and Investments Commission (ASIC) has set its financial reporting, audit, and sustainability surveillance priorities for the 2026-27 financial year — and the bar for audit quality has never been higher. For Australian businesses, directors, and trustees, understanding what ASIC expects from auditors is essential for selecting a professional who will deliver genuine assurance, not just a rubber stamp.

Understanding Going Concern Assessments in Australia

A going concern assessment is one of the most consequential judgements an auditor makes. Under AASB 101, management must assess whether an entity can continue operating for at least 12 months from the end of the reporting period. If material uncertainty exists, specific disclosures are required in the financial statements to ensure a true and fair view.

Auditors are required to independently evaluate management's going concern assessment — not simply accept it. This involves scrutinising conditions such as recurring operating losses, working capital deficiencies, loss of key customers or contracts, and the adequacy of management's mitigation plans.

Where substantial doubt remains after considering those plans, the auditor must include an explanatory paragraph in the audit report. If going concern disclosures are inadequate or omitted entirely, the auditor is required to issue a qualified or adverse opinion — a significant outcome that can affect an entity's access to credit, insurance, and investor confidence.

Going Concern vs. Solvency: A Critical Distinction

Directors often conflate going concern with solvency, but they are distinct legal obligations. Solvency — the ability to pay debts as they fall due — is assessed under the Corporations Act 2001, which requires a solvency declaration annually (and half-yearly for listed entities). Going concern is an accounting concept under AASB 101 that governs how financial statements are prepared.

An entity can be technically solvent while still facing material uncertainty about its ability to continue as a going concern. Both assessments must be made rigorously, and a qualified auditor will ensure that the financial statements reflect the true position on both dimensions.

ASIC Audit Surveillance Priorities for 2026-27

In May 2026, ASIC published its financial reporting, audit, and sustainability focus areas for the 2026-27 financial year. These priorities directly shape what auditors must demonstrate — and what businesses should expect from their audit engagement.

Audit File Reviews

ASIC has committed to reviewing 25 audit files during 2026-27, selected through a combination of random sampling and risk-based targeting. The selection will include listed companies, unlisted companies, registrable superannuation entities (RSEs), and managed investment schemes (MISs). Files are prioritised where there is a risk of material misstatement or concerns about auditor independence.

Financial Reporting Focus Areas

ASIC's financial reporting surveillance will concentrate on areas requiring significant management judgement, including:

• Revenue recognition — particularly where performance obligations are complex or span multiple reporting periods
• Asset impairment assessments — including goodwill, intangibles, and property, plant and equipment in sectors facing economic headwinds
• Financial instrument measurement — fair value estimates and expected credit loss models under AASB 9
• Decommissioning and site-restoration costs — in line with ASIC's updated guidance under AASB 137

Independence and Conflict of Interest

ASIC is actively engaging with the six largest audit firms regarding their independence and conflict of interest obligations, following findings in Report 817. Businesses engaging mid-tier or boutique audit firms should also verify that their auditor has robust independence policies, particularly where the firm also provides non-audit services such as tax advice, consulting, or bookkeeping.

Sustainability Reporting and Audit Obligations

Australia's mandatory climate-related financial disclosure regime, which commenced in 2025 for Group 1 entities, has introduced a new dimension to audit and assurance obligations. ASIC conducted a desktop review of sustainability reports lodged by Group 1 entities for the financial year ending 31 December 2025 and identified several areas requiring improvement ahead of the 30 June 2026 reporting season.

Key issues ASIC flagged include:

• Misleading disclaimers — entities using disclaimers that suggest users should not rely on sustainability report information, which conflicts with the statutory objectives of Chapter 2M of the Corporations Act
• Inadequate risk disclosure — failing to disclose climate risks similar to those previously reported as having financial impacts
• Obscured material information — voluntary disclosures that bury or dilute material climate-related financial information required under AASB S2
• Imprecise cross-referencing — cross-references that do not meet the requirement to refer to reports published by the same entity, available on the same terms

For entities in Group 2 and Group 3 (which face mandatory reporting obligations from 2026 and 2027 respectively), these early observations from ASIC provide a clear signal of what the regulator will scrutinise. Engaging an auditor with sustainability assurance experience — and familiarity with ASSA 5000 and the Australian Sustainability Reporting Standards — is increasingly important.

Common Red Flags When Choosing an Auditor

Not all audit engagements deliver the same quality of assurance. Australian businesses should be alert to the following warning signs when selecting or retaining an auditor:

• Lack of industry specialisation — auditors unfamiliar with your sector may miss industry-specific risks in revenue recognition, asset valuation, or regulatory compliance
• Independence impairment — auditors who also provide significant non-audit services to the same client face structural conflicts that can compromise objectivity
• Insufficient professional scepticism — an auditor who consistently accepts management representations without independent corroboration is not providing genuine assurance
• No documented going concern procedures — if an auditor cannot explain how they assessed going concern, their opinion may not withstand regulatory scrutiny
• Unfamiliarity with ASIC's current focus areas — auditors who are not tracking ASIC's annual surveillance priorities may miss the issues most likely to attract regulatory attention

Questions to Ask a Prospective Auditor

Before engaging an auditor for your 2026-27 financial year, use these questions to assess their capability and independence:

1. How do you approach going concern assessments, and what procedures do you perform beyond reviewing management's own analysis?
2. Are you familiar with ASIC's 2026-27 financial reporting and audit focus areas, and how do they affect your audit plan for our entity?
3. What non-audit services do you or your firm provide to clients, and how do you manage independence obligations?
4. Do you have experience with sustainability reporting assurance under ASSA 5000 and AASB S2?
5. How many audit files from your firm have been reviewed by ASIC in the past three years, and what were the outcomes?
6. What is your process for communicating significant audit findings and going concern concerns to the board or audit committee?

How MyMoney® Can Help

Selecting an auditor who genuinely understands ASIC's current surveillance priorities, going concern obligations, and sustainability assurance requirements is not a decision to make lightly. The consequences of a substandard audit — from regulatory action to reputational damage — can be severe.

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In a year when ASIC is intensifying its audit quality surveillance and sustainability reporting oversight, the right auditor is not just a compliance requirement — they are a strategic asset for your organisation.