The corporate regulator has lambasted the major auditors for sloppy work, and poor governance and accountability practices.
A sample of audits for the six months to June 2020 questions the quality and integrity of audit services.
In aggregate, ASIC found the big audit service providers overlooked material inaccuracies in financial reports or 27% in the 179 audit areas it reviewed.
Deloitte failed to obtain reasonable assurance that a financial report was free of material misstatement in nine of the 26 key areas reviewed.
For one entity, Deloitte failed to audit fee revenue appropriately and test the accuracy of net asset values which were the basis for asset management fees.
PwC, BDO, Grant Thornton and KPMG failed to obtain reasonable assurance that the financial reports were free of material misstatement in numerous key areas.
"Firms must strengthen existing initiatives and implement further new initiatives to improve audit quality. This includes enhancing a culture focused on audit quality, the experience and expertise of partners and others, supervision and review of audits, and accountability of partners and others for audit quality," ASIC commissioner Cathie Armour said.
Auditors' weakest point, she said, was in the areas of asset valuations, particularly impairment of non-financial assets and the audit of revenue.
The six-month review period does not factor in the impact of COVID-19.
Consequently, this leads to more difficult judgements on asset values, liabilities, solvency, going concern and disclosures, as well as challenges from remote working arrangements.
"Auditors need to respond to these conditions in their audits," she said.
ASIC launched its review into audits in 2019. While it is still early days, the watchdog is aiming to enforce actions against auditor misconduct, delve into conflicts of interest, and force more transparency in audit inspection results.
A recent inquiry into the audit sector stopped short of breaking up vertical integration within providers of the big accounting and audit firms in a bid to combat conflicts of interest.