Has Anything Really Changed? ASIC’s 2025 Audit Review and the State of Audit Quality in Australia

As Managing Director of National Audits Group, I’ve witnessed firsthand the evolving landscape of audit quality in Australia. ASIC’s 2025 review is not just another annual report, it’s a call to action for our profession. The familiar challenges persist, but regulatory expectations are rising rapidly, and the time for gradual improvement has passed.

Regulatory Insights: A Shift from Guidance to Accountability

ASIC’s latest report, REP 819 – Oversight of Financial Reporting and Audit 2024-25, builds on last year’s REP 776 and completes a trilogy of publications alongside REP 816 and REP 817. Together, these reports provide a cohesive picture of Australia’s audit environment, highlighting persistent issues in superannuation reporting, auditor independence, and overall governance.

This year, ASIC’s approach is notably more assertive. The regulator reviewed 254 company financial reports which is a 40% increase on the previous year, and 18 entities agreed to make changes to their disclosures, with 12 committing to enhance risk reporting. The introduction of Audit Deficiency Reports under section 50C of the ASIC Act means firms that fail to rectify problems may now be publicly identified. Transparency is replacing quiet correction, and accountability is front and centre.

Persistent Weaknesses: The Need for Cultural Change

Despite heightened oversight, familiar deficiencies remain:

Over-reliance on management assumptions without adequate corroboration
Impairment models using optimistic forecasts and discount rates
Misapplication of revenue recognition under AASB 15
Insufficient documentation of professional judgements

These recurring issues are not simply technical; they reflect a need for cultural change within the profession. ASIC’s message is clear: improvement is needed, and auditors must proactively demonstrate independence and report contraventions.

Independence: The Foundation of Public Trust

Auditor independence remains the profession’s Achilles heel. ASIC continues to find breaches of rotation and long-association requirements, with only three auditors voluntarily reporting independence breaches in the past year. Disciplinary actions including registration restrictions and cancellations signal a new regulatory mindset: independence is not a compliance checklist but a barometer of ethical culture. Firms must treat rotation and conflict reviews as more than formalities.

The Expanding Audit Frontier: Sustainability and ESG

A genuinely new dimension of ASIC’s oversight is its focus on sustainability reporting. The 2024-25 program reviewed 41 voluntary climate disclosures and found many to be repetitive and weakly linked to financial performance. With mandatory AASB S2 Climate-related Disclosures coming into effect in 2026, ASIC is setting expectations early. Auditors must develop competence in ESG assurance, build cross-functional teams, and integrate data analytics that bridge financial and non-financial metrics. Those who lead in this space will define the next generation of trusted advisors.

Shared Accountability: Boards and Audit Committees

Audit quality is a shared responsibility. Boards and audit committees must take a hands-on role in ensuring accuracy and transparency commissioning well-researched position papers, challenging management judgements, and ensuring audit engagements are properly resourced. Audit committees should scrutinise audit fees, verify independence declarations, and monitor whether issues raised in prior years have been closed out. Directors who treat financial reporting as a compliance exercise will find themselves increasingly accountable for its quality.

A Profession at a Crossroads

The findings of REP 819 reflect a profession under strain. Firms face tight margins, workforce shortages, and mounting complexity. Investors want forward-looking insight, not just assurance of historical numbers. Technology AI-driven testing and data analytics is helping, but professional judgement and ethical courage remain decisive. The problem is not tools, but mindset.

Australia’s audit environment is also being reshaped by global momentum. Regulators in the UK and US have intensified their own programs, and ASIC’s approach now mirrors these efforts toward public transparency and cross-border accountability. The profession stands at a crossroads: either embed quality as a core value or risk further erosion of trust.

Enforcement with Purpose

ASIC’s enforcement actions in 2024–25 make one thing clear: inaction will carry consequences. Registration conditions, public naming of deficiencies, and disciplinary outcomes are now standard tools for driving change. The objective is not punishment but behavioural shift. By making results public, ASIC is reframing audit quality as a matter of professional reputation. Firms must address root causes proactively before regulatory review. Smaller and mid-tier firms should take particular note: randomised inspections mean no firm is too small to be scrutinised.

The Path Forward: Collaboration and Continuous Improvement

The most constructive response to ASIC’s findings is collaboration rather than defensiveness. Regulators and firms share a common goal to strengthen public confidence in financial reporting. Firms that engage with ASIC’s observations as a quality-improvement tool can transform their approach from compliance to leadership. This requires a cultural shift toward continuous learning, ethical leadership, and transparency with clients. Quality management under ASQM 1 must be a living system, not a manual on a shelf.

National Audits Group: Leading with Insight and Independence

At National Audits Group, I see ASIC’s 2025 report as both a warning and an opportunity. It validates my long-held belief that audit quality must be anchored in independence, evidence, and ethics. Our approach reflects these priorities:

Evidence-driven auditing: enhanced use of data analytics to strengthen testing in high-risk areas
Ethical independence: rigorous rotation and conflict monitoring supported by ongoing training
Open communication: clear dialogue with boards and audit committees to resolve issues early
Future readiness: developing capabilities for sustainability and ESG assurance ahead of regulatory mandates

We have invested in AI-driven audit tools and expanded our staff training programs to ensure our team is equipped for the challenges ahead. These initiatives ensure our clients benefit from audits that withstand both regulatory and investor scrutiny audits that build trust.

A Call to Action

As Managing Director, I encourage all stakeholders directors, auditors, and regulators to work together in raising the bar for audit quality. Let’s move beyond compliance and embrace a culture of excellence. The future of our profession depends on our collective commitment to transparency, independence, and continuous improvement.

Steven Watson, Managing Director, National Audits Group

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