Five Audit and Reporting Requirements You May Not Be Aware of

The Australian government aims to make the country an easy one to do business in. However, there are audit, reporting, and disclosure regulatory requirements to running a business in the country, and these obligations can become challenging.

For startups and small businesses, the reporting requirements are relatively minimal, however, by the time you’re ready to move into the scale-up stage, it’s important to engage the services of a professional advisor to help you understand the full scope of your obligations.

For example, have you considered if your business has audit requirements?

If you are a growing business, did you know that when you meet a certain size threshold, you have obligations under the Corporations Act to have your financial report audited and lodged with ASIC?

There are three thresholds that you need to be aware of:

• Consolidated Revenue > $50m for the financial year of the company and the entities it controls
• Consolidated Total Assets> 25m at the end of the financial year of the company and the entities it controls
• No of FTE employees> 100 of the company and the entities it controls

If any two of the above three size thresholds are met, lodgement of the audited financial report is required within four months of year-end. For a June year end that means by 31 October.

If you have recently obtained an Australian Financial Services Licence (AFSL), what are your obligations under the Corporations Act?

Another regulatory requirement applies specifically to AFSL holders. Annually, AFSL holders are required to lodge ASIC Form FS70 together with a set of General Purpose (Tier 2) financial statements, encompassing as a minimum:

• A profit and loss statement
• Statement of financial position
• Note disclosures applicable to General Purpose Tier 2 reporting
• Audit report

For the purposes of General-Purpose reporting, the Tier 2 framework will be sufficient for most entities. However, if your entity has public accountability, for example, its debt or equity instruments are traded in a public market (or intends to do so) or if your entity holds assets in a fiduciary capacity, for example, it holds client monies, full General-Purpose reporting will be required.

Consolidated Entity Disclosure Statement (CEDS)

Meanwhile, this will be of interest to executives at public companies: commencing from financial years commencing on or after 1 July 2023, all Australian public companies (listed and unlisted) are required to disclose information about their subsidiaries at the end of the financial year in their annual financial report. The details required to be disclosed are:

• The subsidiary’s name
• Whether the subsidiary is a body corporate; trust or partnership
• Where the subsidiary was incorporated
• The percentage ownership
• Whether the subsidiary is an Australian resident entity or a foreign resident for tax purposes
• If a foreign resident, foreign jurisdiction for tax purposes

The CEDS is a separate statement to the notes to the financial statements and separate to the financial statement note on controlled entities required under AASB 12. All subsidiaries must be included in the CEDS regardless of their materiality to the group financial report.

In addition, the Directors Declaration must state whether the CEDS is true and correct. This is considered a higher requirement than the pre-existing true and fair representation required in the rest of the Directors Declaration.

What if I don’t prepare consolidated financial statements?

If the company is a standalone company and does not prepare consolidated financial statements a statement to that effect is required.

Are you considering any of the following:

Finally, if you are considering any of these for your business:

• Obtaining a loan/finance facility from your bank or other lenders
• Selling your business
• Seeking to improve your internal controls and corporate governance policies

You may well need to have your annual financial statements subject to external audit.

Missing your compliance obligations for any reason – even a simple lack of awareness – can result in both stiff penalties and a time-consuming process to deal with the regulators directly.

This is why it’s important to access the services of an expert local advisory. Above and beyond the strategic support, an advisory will have a detailed understanding of the local regulatory requirements and will help ensure that all required documents and audits are completed in proper order.

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