SUMMARY OF AUDIT REPORTING REQUIREMENTS UNDER THE Corporations Act 2001
1 The auditor’s responsibilities for an entity subject to the Corporations Act 2001 (“the Act”) are found in Division 3 of Part 2M.3 of that Act. The Act sets out the auditor’s obligations to form an opinion and to report to members, both in respect of the audit of an annual financial report,[13] and the audit or review of a half-year financial report.
2 This Appendix provides a summary of the auditor’s responsibilities with regard to the audit of an annual financial report or a half-year financial report in accordance with the Act and includes two example auditors’ reports prepared under the Act. The Appendix in ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, provides a summary of the auditor’s responsibilities with regard to the review of a half-year financial report in accordance with the Act.
Duty to Form an Opinion
3 Section 307 of the Act requires an auditor who conducts an audit of the financial report for a financial year or half-year to form an opinion about:
(a) whether the financial report is in accordance with this Act, including:
(i) section 296 or 304 (compliance with accounting standards); and
(ii) section 297 or 305 (true and fair view); and
(b) if the financial report includes additional information under paragraph 295(3)(c) or 303(3)(c) (information included to give true and fair view of financial position and performance) — whether the inclusion of that additional information was necessary to give the true and fair view required by section 297 or 305.
(c) whether the auditor has been given all information, explanation and assistance necessary for the conduct of the audit; and
(d) whether the company, registered scheme or disclosing entity has kept financial records sufficient to enable a financial report to be prepared and audited; and
(e) whether the company, registered scheme or disclosing entity has kept other records and registers as required by this Act.
Duty to Report – Annual Financial Report
4 Section 308(1) of the Act states that an auditor who audits the financial report for a financial year must report to members on whether the auditor is of the opinion that the financial report is in accordance with this Act, including:
(a) section 296 (compliance with accounting standards); and
(b) section 297 (true and fair view).
If not of that opinion, the auditor’s report must say why.
Non-compliance with accounting standards
5 Section 308(2) of the Act requires that if the auditor is of the opinion that the financial report does not comply with an accounting standard, the auditor’s report must, to the extent practicable to do so, quantify the effect that non-compliance has on the financial report. If it is not practicable to quantify the effect fully the report must say why.
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Defects or irregularities
6 Section 308(3) requires that the auditor’s report must describe:
(a) any defect or irregularity in the financial report; and
(b) any deficiency, failure or shortcoming in respect of the matters referred to in paragraph 307(b), (c) or (d) (described above).
Auditing Standards Disclosures
7 Section 308(3A) requires that the auditor’s report must include any statements or disclosures required by the auditing standards.
Information included to give true and fair view
8 Section 308(3B) requires that if the financial report includes additional information under paragraph 295(3)(c) (information included to give true and fair view of financial position and performance), the auditor’s report must also include a statement of the auditor’s opinion on whether the inclusion of that additional information was necessary to give the true and fair view required by section 297.
Other
9 Section 308(4) of the Act requires that the report must specify the date on which it was made.
Duty to Report – Audit of Half-Year Financial Report
10 Section 309(1) of the Act states that an auditor who audits the financial report for a half-year must report to members on whether the auditor is of the opinion that the financial report is in accordance with this Act, including:
(a) section 304 (compliance with accounting standards); and
(b) section 305 (true and fair view).
If not of that opinion, the auditor’s report must say why.
Non-compliance with accounting standards
11 Section 309(2) of the Act requires that if the auditor is of the opinion that the financial report does not comply with an accounting standard, the auditor’s report must, to the extent practicable to do so, quantify the effect that non-compliance has on the financial report. If it is not practicable to quantify the effect fully the report must say why.
Defects or irregularities
12 Section 309(3) requires that the auditor’s report must describe:
(a) any defect or irregularity in the financial report; and
(b) any deficiency, failure or shortcoming in respect of the matters referred to in paragraph 307(b), (c) or (d) (described above).
Auditing Standards Disclosures
13 Section 309(5A) requires that the auditor’s report must include any statements or disclosures required by the auditing standards.
Information included to give true and fair view
14 Section 309(5B) requires that if the financial report includes additional information under paragraph 303(3)(c) (information included to give true and fair view of financial position and performance), the auditor’s report must also include a statement of the auditor’s opinion on whether the inclusion of that additional information was necessary to give the true and fair view required by section 306.
Other
15 Section 309(6) requires that a report under subsection (1) must specify the date on which it was made.
Auditor’s Independence Declaration
16 The Act contains general and specific provisions in relation to auditor independence. This section discusses the requirement of the auditor to prepare a written auditor’s independence declaration only.
17 Section 307C provides that if an auditor conducts an audit of a financial report for a full year or an audit or review of the financial report for a half year, the auditor must give the directors of the company, registered scheme or disclosing entity:
(a) a written declaration that, to the best of the auditor’s knowledge and belief, there have been:
(i) no contraventions of the auditor independence requirements of the Act in relation to the audit or review; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit or review; or
(b) a written declaration that, to the best of the individual auditor’s knowledge and belief, the only contraventions of:
(i) the auditor independence requirements of the Act in relation to the audit or review; or
(ii) any applicable code of professional conduct in relation to the audit or review,
are those contraventions details of which are set out in the declaration.
18 Section 307C(5) of the Act requires that the declaration be given when the audit report is given to the directors of the company, registered scheme or disclosing entity and that the declaration must be signed by the person making the declaration. However, ASIC has issued Class Order 05/83 “Timing of Auditor’s Independence Declarations”, which allows an auditor’s report to be signed after the auditor’s independence declaration is given to directors.
Signing the Auditor’s Report
19 Section 324AA of the Act states that, subject to part 2M.4 of the Act, the following may be appointed as auditor for a company or a registered scheme for the purposes of the Act:
(a) an individual;
(b) a firm; and
(c) an audit company.
20 Section 324AB (3) of the Act requires that a report or notice that purports to be made or given by a firm appointed as auditor of a company or registered scheme is not taken to be duly made or given unless it is signed by a member of the firm who is a registered company auditor both:
(a) in the firm name; and
(b) in his or her own name.
21 Section 324AD (1) of the Act requires that a report or notice that purports to be made or given by an audit company appointed as auditor of a company or registered scheme is not taken to be duly made or given unless it is signed by a director of the audit company (or the lead auditor or review auditor for the audit) both:
(a) in the audit company’s name; and
(b) in his or her own name.
Reporting to ASIC
22 Section 311 of the Act contains specific provisions relating to the auditor’s obligation to notify ASIC of certain circumstances within 28 days after the auditor becomes aware of those circumstances. ASIC has issued [PN 34] “Auditors’ Obligations: Reporting to ASIC” that provides guidance to help auditors comply with their obligation under section 311 and 601 HG to report suspected contraventions of the Corporations Act 2001 to ASIC.