ASIC has released its areas of focus for Companies preparing and lodging financial reports for the full and half-years ending 31 December 2023.
Much of their focus remains similar to previous alerts and ASIC continue to emphasise the need for directors, preparers of financial reports and auditors to assess the impact of uncertain market and economic conditions when reporting for 31 December 2023.
In its media release on 19 December 2023 regarding the areas of focus, ASIC Commissioner Kate O’Rourke said:
‘Directors should ensure that company financial reports provide investors with useful and meaningful information on the impact of changing and uncertain economic and market conditions and other developments on their company’s financial position and future performance.
Directors should ensure there are adequate resources, skills and expertise applied to promote quality in the reporting process so that assumptions, underlying estimates, and assessments for financial reporting purposes are reasonable and supportable.
Finally, auditors should focus their professional judgement and scepticism on those areas of the financial report preparation process that are most reliant on estimates and are uncertain. Auditors occupy a privileged position in the financial reporting cycle and are essential to maintaining market integrity.’
The areas of particular consideration noted in the release include:
- impairment and asset values;
- provisions;
- events occurring after year end and before completing the financial report;
- disclosures in the financial report and operating and financial review (OFR); and
- the impact of a new accounting standard for insurers.
Furthermore, the ASIC release notes that disclosures in the financial report about uncertainties, key assumptions and sensitivity analysis are important to investors. Uncertainties may lead to a wider range of valid judgements on asset values and other estimates. These uncertainties may change from period to period and documenting and updating the information supporting the judgement is expected.
ASIC has advised that directors and management need to assess how the current and future performance of an entity, the value of its assets and provisions, as well as the business strategies implemented, may be affected by changing circumstances, uncertainties and risks.
It is important to remember that Directors are primarily responsible for the quality of the financial report. This includes ensuring that management produces quality and timely financial information for audit, supported by robust position papers with appropriate analysis and conclusions referencing relevant accounting standards. Companies must therefore have appropriate processes, records and analysis to support information in the financial report.
The above information has been resourced directly from ASIC’s media release 23-343MR as issued by ASIC on 19 December 2023. ASIC provide further details in respect of the considerations for each of the focus areas noted above in their financial reporting and audit page here.
As your audit and financial reporting specialist, we can assist you with your reporting obligations for 31 December 2023 and with the specific areas of focus noted in the ASIC’s media release.
Please reach out to your contact point at our firm should you have any queries or require any support.
Author: Kamal Thakkar
*Correct as of 29 January 2024
*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is for general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability is limited by a scheme approved under professional standards legislation.
