ASIC Sustainability Reporting and Audit Obligations in Australia: A 2026 Guide for Businesses

Australian businesses and their auditors are navigating a period of significant regulatory change in 2026. The Australian Securities and Investments Commission (ASIC) has introduced mandatory sustainability reporting requirements, updated its guidance on auditor obligations regarding late financial report lodgements, and intensified its surveillance of audit quality across listed companies, large proprietary companies, and managed investment schemes. Understanding these changes — and engaging a qualified auditor who is across the latest requirements — is essential for any entity subject to the Corporations Act 2001 (Cth).

Understanding ASIC's 2026 Audit and Reporting Reforms

ASIC's regulatory agenda for 2026 and 2027 reflects a dual focus: strengthening the quality and timeliness of traditional financial reporting, while simultaneously embedding sustainability assurance into the mainstream audit framework. These two streams are interconnected — entities that fail to meet their financial reporting obligations now face more immediate consequences, while those subject to mandatory sustainability reporting must engage auditors with new and specialised competencies.

The reforms build on a foundation of increased enforcement activity. In late 2025 and continuing into 2026, ASIC issued infringement notices to large proprietary companies for failing to lodge audited financial reports on time — a signal that the regulator is moving from guidance to enforcement on lodgement compliance.

Mandatory Sustainability Reporting: What Has Changed

Australia's mandatory sustainability reporting regime, introduced under the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024, requires certain entities to prepare and lodge sustainability reports alongside their annual financial reports. These reports must address climate-related financial risks and opportunities in accordance with the Australian Sustainability Reporting Standards (ASRS), developed by the Australian Accounting Standards Board (AASB).

Who Must Report and When

The regime is being phased in by entity size. The largest entities — those meeting two of three thresholds (500+ employees, $1 billion+ consolidated gross assets, $500 million+ consolidated revenue) — were required to report from 1 January 2025. Mid-tier entities are being brought into scope progressively through 2026 and 2027, with smaller entities following in subsequent years.

Form 398 and Lodgement Requirements

Entities subject to mandatory sustainability reporting must lodge their sustainability reports with ASIC using Form 398 (Copy of sustainability report and auditor's report). This is a distinct form from Form 388, which is used for annual financial reports. Lodging the wrong form, or failing to include the required auditor's assurance report, constitutes a breach of the lodgement obligations.

Assurance Requirements

Sustainability reports must be accompanied by an assurance report from a registered company auditor. The level of assurance required is being phased in: limited assurance applies in the initial years, with a transition to reasonable assurance for larger entities over time. Auditors providing sustainability assurance must comply with the Australian Standard on Sustainability Assurance (ASSA) 5000, which was developed specifically for this purpose.

Updated Auditor Obligations: Regulatory Guide 34 (RG 34)

ASIC has reissued Regulatory Guide 34 (RG 34) — Auditor obligations: Reporting to ASIC — with significant updates to the obligations of auditors when their clients fail to lodge financial reports on time. These changes reflect ASIC's determination that late lodgement is a serious compliance failure, not merely an administrative oversight.

Under the revised RG 34, an entity's failure to lodge a financial report by the statutory due date constitutes a significant contravention of the Corporations Act 2001. Auditors are now expected to notify ASIC of non-lodgement as follows:

• Listed entities and disclosing entities — Auditors must notify ASIC immediately upon the entity's failure to lodge by the due date. There is no grace period for these entities.
• All other entities — Auditors must notify ASIC if the financial report remains outstanding 28 days after the due date.

This represents a material tightening of the previous guidance and places a direct obligation on auditors to monitor their clients' lodgement compliance and act promptly when deadlines are missed. Auditors who fail to report non-lodgement in accordance with RG 34 may themselves face regulatory scrutiny.

ASIC's 2026–27 Audit Surveillance Program

ASIC's audit surveillance program for 2026–27 will involve the review of 25 audit files, expanding its scope to include managed investment schemes (MISs) alongside listed and unlisted companies and registrable superannuation entities (RSEs). Files are selected based on material corrections, risk indicators such as independence threats, or random selection processes.

ASIC has identified the following as priority focus areas for financial reporting and audit quality in 2026–27:

• Revenue recognition — Particularly for entities with complex or multi-element contracts, or where revenue recognition policies have changed.
• Asset impairment assessments — Including the appropriateness of discount rates, cash flow projections, and the identification of impairment indicators in a higher interest rate environment.
• Financial instruments — Recognition, measurement, and disclosure of financial instruments, including derivatives and fair value assessments.
• Decommissioning and site-restoration provisions — Assessed against AASB 137 Provisions, Contingent Liabilities and Contingent Assets.
• Auditor independence — ASIC continues to engage with the six largest audit firms regarding firm-wide responses to independence and conflict of interest findings identified in Report 817.

Common Mistakes and Red Flags in Audit Compliance

Based on ASIC's enforcement activity and surveillance findings, the following are the most common compliance failures that entities and their auditors should be alert to:

• Late lodgement of financial reports — ASIC has made clear that it will issue infringement notices for late lodgement, particularly for large proprietary companies that have historically treated lodgement deadlines as flexible.
• Inadequate impairment testing — Entities that fail to test goodwill and other assets for impairment in a rising interest rate environment, or that use overly optimistic cash flow projections, are a consistent ASIC focus.
• Sustainability report lodgement errors — Using Form 388 instead of Form 398 for sustainability reports, or failing to include the required assurance report, are procedural errors that ASIC is actively monitoring.
• Auditor independence breaches — Providing non-audit services to audit clients in ways that compromise independence, or failing to rotate audit partners in accordance with the Corporations Act requirements.
• Insufficient disclosure of key audit matters — Auditors who produce boilerplate key audit matter disclosures without entity-specific analysis are increasingly attracting ASIC scrutiny.

Australian Regulatory Context

ASIC is the primary regulator for financial reporting and audit quality in Australia, with powers under the Corporations Act 2001 to conduct surveillance, issue infringement notices, and take enforcement action against entities and auditors who fail to meet their obligations.

The Australian Accounting Standards Board (AASB) sets the accounting and sustainability reporting standards that underpin financial and sustainability reports. The AASB has collaborated with ASIC to produce eight educational learning modules on sustainability reporting, covering climate-related risks, emissions accounting, and scenario analysis.

The Auditing and Assurance Standards Board (AUASB) sets the auditing standards that registered company auditors must comply with, including ASSA 5000 for sustainability assurance engagements. Auditors providing sustainability assurance must ensure they have the competencies required by ASSA 5000, which may require additional training or the engagement of specialist advisers.

The Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Act 2025 introduced temporary modified liability settings for "protected statements" in sustainability reports, providing some relief for entities making forward-looking climate disclosures in good faith during the transition period.

Questions to Ask Your Auditor

When engaging an auditor for your 2026 financial year obligations, consider asking the following questions to assess their readiness for the current regulatory environment:

• Are you registered as a company auditor with ASIC, and is your registration current?
• Do you have experience with sustainability assurance engagements under ASSA 5000?
• How do you monitor our financial report lodgement deadlines, and what is your process for notifying ASIC if a deadline is missed?
• What is your approach to impairment testing in the current interest rate environment?
• How do you ensure your independence is maintained, particularly if you provide any non-audit services to our entity?
• Are you familiar with Form 398 and the lodgement requirements for sustainability reports?
• What training have you undertaken on the Australian Sustainability Reporting Standards (ASRS)?

How MyMoney® Can Help

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Post a Brief to describe your audit requirements and receive competitive proposals from qualified auditors. Or Browse Auditors on the MyMoney® Marketplace to find a specialist who is fully across ASIC's 2026 requirements and can help your entity meet its obligations with confidence.