Australian Financial Reporting and Audit

In Australia, our regulators seek to ensure that relevant and reliable financial reports and audit opinions are issued to assist users in making better informed financial decisions which contributes to market integrity and confidence.

Although all companies should keep records to understand how their business is operating financially, some types of companies need to keep these records for the purposes of preparing and lodging financial reports with Australian regulators.

Generally, companies must lodge financial reports where:

  • there are substantial sums of money involved
  • the general public has invested funds with the company, or
  • the company exists for charitable purposes only and is not intended to make a profit.

Specifically, Section 292 of the Corporations Act 2001 (Corporations Act) requires the following entities to prepare financial reports:

  • all disclosing entities
  • public companies
  • companies limited by guarantee (except small companies limited by guarantee)
  • all large proprietary companies that are not disclosing entities
  • all registered investment schemes
  • small proprietary companies that are foreign-owned
  • small proprietary companies that have one or more crowd-sourced funding shareholders at any time during the year.

One of our prominent Australian regulators is ASIC, which is generally involved in administering compliance for entities subject to the Corporations Act. ASIC can also provide relief from compliance requirements in certain circumstances.

If your company is classified as a ‘large’ proprietary company, you will be required to prepare and lodge a financial report and a director’s report for each financial year. This financial report must be audited by a Registered Company Auditor unless ASIC grants relief.

From financial years commencing on or after 1 July 2019, a proprietary company is defined as ‘large’ for a financial year if it satisfies at least two of the below criteria:

  • the consolidated revenue for the financial year of the company and any entities it controls is $50 million or more
  • the value of the consolidated gross assets at the end of the financial year of the company and any entities it controls is $25 million or more, and
  • the company and any entities it controls have 100 or more employees at the end of the financial year.

Importantly, the above thresholds have increased with recent changes to Corporations Regulations.

For financial years prior to 30 June 2019, a proprietary company is defined as ‘large’ if it satisfies at least two of the below criteria:

  • the consolidated revenue for the financial year of the company and any entities it controls is $25 million or more
  • the value of the consolidated gross assets at the end of the financial year of the company and any entities it controls is $12.5 million or more, and
  • the company and any entities it controls have 50 or more employees at the end of the financial year.

The following entities may also be required to prepare financial reports:

  • small proprietary companies that ASIC directs to prepare financial reports
  • small proprietary companies that shareholders direct to prepare a financial report
  • small companies limited by guarantee subject to a member direction

We encourage you to review the updated financial reporting thresholds and consider the financial reporting implications for years ended 30 June 2020.

Please contact your local Accru advisor should you have any questions, we would be happy to clarify how these changes impact your organisation and provide ongoing professional guidance.

About the Author
Steven Zabeti , Accru Felsers Sydney
Steven specialises in external auditing, due diligence, initial public offerings, stock exchange listings and financial reporting. He has close links with the Chinese and German business communities and assists many overseas organisations with accounting, taxation and auditing when they expand into Australia. His clients include public companies, foreign subsidiaries, universities and schools, financial services licensees and not-for-profit organisations.
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