August 9, 2017
Professionals | QLD
If your company may be deemed a “large proprietary company” during the year ending 30 June 2018 (FY 2018) and you are preparing to rely on ASIC Corporations (Audit Relief) Instrument 2016/784 (Instrument) to access audit relief, don’t hesitate, the time to act is now.
Planning is crucial to accessing the relief afforded by the Instrument as there is work to be done and documented during each year in which you are seeking to obtain the relief.
What relief does the instrument offer?
The Corporations Act 2001 (Cth) (Act) places obligations on large proprietary companies to have their annual financial statements audited.
The Instrument provides that a large proprietary company does not have to comply with the audit requirements specified in the Act if it satisfies all of the conditions specified in the Instrument.
Why is planning crucial to obtain the benefits of the instrument?
Compliance with the conditions of the Instrument requires that certain conditions be met throughout the financial year, even if it is not clear whether the company relying on the Instrument will be a large proprietary company at the start of FY 2018.
The conditions of the Instrument that must be met during the year (arguably even before a company determines with certainty that is a large proprietary company) include:
- preparation of quarterly management reports;
- quarterly resolutions by directors regarding solvency and liability to asset ratios.
Determining whether a company may need to rely on the Instrument for FY 2018 and taking steps to meet the quarterly reporting conditions requires planning of projected income, assets and employee levels (the determining factors as to whether a company is a large proprietary company) and the company to take steps in each of the four quarters of the year (which may be before the entity is actually determined to be a large proprietary company).
What are the consequences of failing to meet the conditions of the instrument?
If a company fails to meet the conditions of the Instrument it is unable to rely on the Instrument to access audit relief. Anchor
As a result, to access audit relief, the company would need to apply to the Australian Securities and Investments Commission (ASIC) for individual relief.
Such an application would need to be provided well in advance of the date for lodgement of the company’s audited reports, as ASIC has stated that these applications take time to consider and if an application is being considered at a due date for lodgement of audited reports, the company cannot rely on the individual relief.
The risk with relying on ASIC to exercise a discretion to provide individual audit relief is that if ASIC does not use this discretion, the company will need to have its financial statements audited and is unable to rely on the Instrument in the future.
Can the instrument be relied on in the future if you do not satisfy the conditions in fy 2018?
One of the conditions of the Instrument is that the company must not have had its financial statements audited for any period following the 1993 financial year.
It is therefore important to plan to either satisfy the conditions of the Instrument or make a timely application to ASIC for individual audit relief.
How can McInnes Wilson Lawyers help?
- With the interpretation of the Instrument.
- Developing strategies to ensure compliance with the Instrument.
- Preparing director’s resolutions that comply with the requirement of the Instrument.
- Making applications to ASIC for individual audit relief.