ASIC concerned over ’inappropriate accounting treatments’

Late last week, ASIC announced the results from a review of the 30 June financial reports of 215 listed and other public interest entities.

Inquiries made by ASIC from the reviews relate mostly to impairment and other asset values (28), followed by revenue recognition (18), tax accounting (11), consolidation accounting (4), business combinations (3), expense deferral (3), and other matters (12).

"ASIC’s concerns continue to relate to impairment of non-financial assets and inappropriate accounting treatments. Directors and auditors should focus on values of assets and accounting policy choices in preparing their December 2018 financial reports," ASIC commissioner John Price said.

ASIC issued Information Sheet 203 Impairment of non-financial assets: Materials for directors in June 2015 to assist directors and audit committees in considering whether the value of non-financial assets, shown in the company’s financial report, continues to be supportable.

The commission’s risk-based surveillance of public interest entities’ financial reports for reporting periods ended from 30 June 2010 to 31 December 2017, has led to material changes to 4 per cent of the financial reports of public interest entities reviewed by ASIC. The main changes related to impairment of assets, revenue recognition and expense deferral.

Also last week, ASIC announced that one in four auditors from 20 Australian audit firms did not obtain reasonable assurance that the company’s financial report was free from material misstatement.

ASIC issued a report on the results of inspections it carried out of 20 Australian audit firms of varying sizes, in the period 1 January 2017 to 30 June 2018.

It found that in 24 per cent of the total 347 key audit areas that it reviewed across 98 audit files, auditors did not obtain reasonable assurance that the financial report was free from material misstatement.

This compares to 25 per cent of 390 key audit areas in the previous 18-month period ended 31 December 2016.