SUMMARY OF AUDIT REPORTING REQUIREMENTS SUMMARY OF AUDIT REPORTING REQUIREMENTS UNDER THE CORPORATIONS ACT 2001

SUMMARY OF AUDIT REPORTING REQUIREMENTS UNDER THE CORPORATIONS ACT 2001

1 The purpose of this Appendix is to provide explanatory guidance on the effect of the reporting entity concept on auditor’s reports prepared under the Corporations Act 2001 (the “Act”) for entities reporting under the Act that are not reporting entities (that is, non reporting entities).[12]

2 The determination as to whether an entity is a reporting entity rests with those charged with governance of the entity. Guidance as to what constitutes a reporting entity is contained in Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity issued by the Australian Accounting Standards Board (“AASB”). A further definition is contained in Australian Accounting Standard AASB 3 Business Combinations as:

“An entity in respect of which it is reasonable to expect the existence of users who rely on the entity’s general purpose financial report for information that will be useful to them for making and evaluating decision about the allocation of resources”.

3 The determination as to whether an entity is a reporting or non-reporting entity is important, as this decision directly impacts on the level of disclosure in the entity’s financial report. Non-reporting entities are not required to prepare general purpose financial reports and are instead permitted to prepare a special purpose financial report for the purpose of fulfilling the directors’ financial reporting requirements of the Corporations Act 2001.

Financial Reporting Requirements of the Act

Requirement for an entity to prepare a Financial Report

4 Section 292 of the Act requires that a financial report and a directors’ report must be prepared for each financial year by:

(a) all disclosing entities; and

(b) all public companies; and

(c) all large proprietary companies; and

(d) all registered schemes.

5 Section 293 of the Act provides that shareholders with at least 5% of the votes in a small proprietary company may give the company a direction to:

(a) prepare a financial report and directors’ report for a financial year; and

(b) send them to all shareholders.

In addition, under section 294, the Australian Securities and Investments Commission (ASIC) may give a small proprietary company a direction to comply with requirements of Division 1 3, 4, 5 and 6 of the Act for a financial year.

Contents of a Special Purpose Financial Report

6 Section 295 of the Act specifies that the financial report for a financial year consists of:

(a) the financial statements for the year; and

(b) the notes to the financial statements; and