• This chapter deals primarily with financial audits, financial reports, annual reports and reporting requirements.
• You will generally need to check whether your company constitution states that you are to provide a financial statement, financial report or annual report to the company shareholders regardless of whether the law, shareholders or the Australian Securities and Investments Commission (ASIC) requires you to do so.
• You will need the company to appoint an auditor. The auditor is required to provide a financial report to the company and will also examine and report on the adequacy of the company’s financial and statutory record keeping. This is not to be confused with a company tax return.
• Not just anyone can be an auditor. The following may be appointed as an auditor of your company:
  • an individual who is a registered company auditor;
  • a firm; or
  • a company that is an authorised audit company.
• Directors of a proprietary company can appoint an auditor for your company if an auditor has not been appointed in a general meeting.
• There are special rules for auditing large proprietary companies, public companies, financial service licences and management investment schemes.
• ASIC also provides relief from some of these types of companies being audited if certain requirements are met. Other types of companies have additional requirements on top of the audit requirements. This section deals with small proprietary companies only.
• If you are an Australian Financial Services Company you must also lodge financial statements under the Corporations Act 2001 (Cth).

• Small proprietary companies generally do not have to provide financial reports or statements to ASIC under the Corporations Act 2001 (Cth) however there are a number of important exceptions. These exceptions include:
  • if your company is controlled by a foreign company then you may be required to prepare or send a financial statement;
  • where shareholders direct your company to do so; or
  • where ASIC directs you to lodge a financial report.
• If any of these situations apply your company will be required to prepare and lodge a financial report.
• Depending on the size and nature of your small company the exceptions and exemptions can be complex and it is best for you to discuss whether you need to provide a financial statement or report with your compliance lawyer, adviser or accountant.
• Generally speaking under the Corporations Act 2001 (Cth) the following entities are required to prepare financial reports:
  • all disclosing entities;
  • public companies;
  • companies limited by guarantee except small companies limited by guarantee;
  • all large proprietary companies;
  • all registered schemes;
  • small proprietary companies that are foreign-controlled;
  • small proprietary companies or small companies limited by guarantee ASIC direct to prepare financial reports;
  • small proprietary companies subject to a shareholder direction under section 293 of the Corporations Act 2001 (Cth); and
  • small companies limited by guarantee subject to a shareholder direction under section 294a of the Corporations Act 2001 (Cth).

·         An annual report is a report containing information about a company and is made available at the annual general meeting. Some people believe it is the best source of information about a company’s performance. It will contain financial information required by law such as:

o   the directors' report including directors' remuneration;

o   financial reports;

o   governance reports; and

o   the auditor’s report on financial and remuneration reports.

·         Not all companies are required to produce annual reports. In general as a small proprietary company you will not be required to produce an annual report unless you are requested to do so by law, ASIC, your constitution or your shareholders.

• ASIC will send your company an annual statement each year within a few days of its annual review date. In most cases this will be on the same date as your company registration.
• You will need to check the statement and send it back to ASIC within the stipulated timeframe.