AASB S2 readiness: Your auditor's eyesight is sharper than yours

Ask Group 2 finance teams how ready they are for AASB S2, then ask the audit firms that will assure their reports. According to new research, the second answer is the less generous one.

In June 2026, researchers from Monash University, the University of Sydney and the Australian National University published a study of how prepared Australia's audit firms are to assure climate disclosures. It was funded by the AASB, the AUASB and Chartered Accountants ANZ. Among its ten key findings is a short line with a big implication: assurance providers indicate a lower level of preparedness among Group 2 and Group 3 entities than those entities' own self-assessments suggest.

In other words, the firms that will assure Group 2 reports think Group 2 is less ready than it thinks it is.

That makes it useful news. It shows Group 2 where to look, while there is still time to act on it.

What did the research find?

The researchers surveyed audit firms between November 2025 and April 2026, held 13 in-depth interviews with representatives of the 20 largest firms, and reviewed the assurance reports issued for 34 listed Group 1 entities with a 31 December 2025 reporting date. Several of the findings matter for a Group 2 CFO planning year one:

• The readiness gap. Assurers rate Group 2 and Group 3 entities as less prepared than those entities rate themselves.
• Where assurers are most concerned. Their biggest reporting concerns include forward-looking information, scenario analysis and (the reasonable assurance of) Scope 3 emissions.
• Who companies lean on. Reporting entities have relied on their assurance providers to understand how to prepare, through pre-assurance work or help finding the right advisers.
• What it costs. Fee revenue from climate-related assurance and other services is expected to run at about 20% to 40% of the financial statement audit fee, and possibly more for smaller entities, because there is likely to be a minimum cost to doing the work at all.

Why would your auditor see it differently?

The research doesn't say why, but one likely reason is that a self-assessment and an assurance engagement ask different questions.

A self-assessment usually asks whether a process exists. Do we have a climate risk register? Has the board been briefed? Do we know our emissions? A team can answer yes to all three with a clear conscience.

An assurer asks whether you can show it. Where is the board paper that records the oversight? How was each climate risk assessed, by whom, and on what evidence? Can the emissions figure be traced back to its source? The gap between those two sets of answers is likely where Group 2 is most exposed.

Finance leaders already doing the work describe the same split. As Jack Duffy, Head of Finance at Marubeni Itochu Tubulars Oceania, put it in our webinar last December: "Finance teams understand numbers. Emissions data is challenging, but manageable. What's harder is governance, climate risk, strategy, and integration across the business."

Group 1's experience points the same way. The AICD's review of the first wave found that many organisations underestimated the effort and resources involved, and that boards introduced internal sign-off processes modelled on financial reporting.

Does it matter who finds the gaps first?

For the opinion itself, perhaps less than you'd fear. On the narrower year-one scope, the first wave came through well. The AICD reports that every ASX-listed entity in the first cohort received an unqualified limited assurance opinion, and ASIC's review of 40 first-wave reports found no audit reports with modified opinions.

Where it matters is time and money. A gap your assurer finds in the final weeks of the reporting year gets fixed under deadline, sometimes by reconstructing evidence that should have been kept as you went. The same gap found now, with most of the year still to run, is an ordinary piece of work with an owner and a due date.

The AASB S2 assurance requirements also step up from here. In year one, limited assurance covers governance, parts of strategy, and Scope 1 and Scope 2 emissions. From year two, limited assurance covers every AASB S2 disclosure, which brings the forward-looking areas assurers already worry about into scope.

How do you see your gaps the way an assurer would?

The practical fix is to check readiness the way an assurer will, one requirement at a time.

1. Take each AASB S2 requirement and ask: could we show the evidence today? That means the record itself, who approved it and where it lives.
2. Look hardest at the areas assurers flag. Forward-looking information, scenario analysis and your Scope 3 plan are among the assurers' biggest concerns in the research. ASIC also found disclosure clearer on current matters such as governance and risk management, with room to improve on forward-looking and judgement-based disclosures.
3. Write down your judgements as you make them. Materiality calls, scenario choices and estimates are much easier to assure when the reasoning was recorded at the time.
4. Talk to your assurer early. The research shows companies already rely on assurers to understand what's expected. Ask what they will want to see in year one, and plan to it.

A useful test: if your assurer asked for the evidence behind any line of your draft disclosure tomorrow, how long would it take you to find it?

Find it first

Finding it first means seeing your AASB S2 gaps before anyone else does. Drova's AASB S2 solution reads the standard for you and turns it into a plan with an owner and a deadline on every clause. Your team links the evidence and controls you already have, and adds tasks for anything still open. Every piece of evidence stays linked to the requirement it supports, with a record of who approved it, and the disclosure report is assembled from that work for your team to review.

It's the simplest way to know what you don't know. Every gap you find now is one your auditor won't.

Find it first: start free and see your own AASB S2 gaps, clause by clause.