| Australia - Accounting and Audit requirements Introduction
Our intention in this brief introduction to the area will be to address matters pertaining to corporations, since in our experience, this is the area which generates most confusion to the public at large. Statutory accounting and audit requirements This statement defines a reporting entity as an entity (including an economic entity) in respect of which it is reasonable to expect the existence of users dependent on general purpose financial reports for information which will be useful to them for making and evaluating decisions about the allocation of scarce resources. In short, this means that if users of the financial statements are not able to obtain information about the financial operations of a business other than that which is disclosed in the accounts themselves, then the accounts presentation is deemed general purpose and all accounting standards and corporations Act requirements must be applied to them. If, on the other hand, the end user is able to obtain clarification of matters disclosed in the accounts direct from the company in the form of supplementary information that is not disclosed in those accounts, then the accounts are deemed special purpose and do not need to comply with all accountings standards, etc. All Public Companies listed on the Australian Stock Exchange are reporting entities. All Public Companies must have their Financial Statements audited. Small versus large proprietary companies A company is classified as small for a financial year if it satisfies at least two of the following tests:
A company that does not satisfy at least two of these tests is classified as large. The reporting requirements of such companies are as set out in Chapter 2m of the Corporations Act 2001. Under this chapter, a small company is only required to prepare financial statements if requested to do so by the Australian Securities and Investments Commission (ASIC) or by shareholders who hold at least 5% of the companys voting shares. Although the Corporations Act 2001 itself may not require a small proprietary company to prepare a financial report except in the circumstances mentioned, the company may need to prepare the annual financial reports for the purposes of other laws (for example, income tax laws). Moreover, good business practice may also make it advisable for the company to prepare the financial reports so that it can better monitor and manage its financial position. Large proprietary companies must prepare annual financial reports and a directors' report, have the financial report audited (unless they comply with specific ASIC class orders) and send both reports to shareholders. They must also lodge the annual financial reports with ASIC unless exempted. Listed versus unlisted public corporations The due dates for lodgement are set down in the Listing Rules and Corporations Act which also sets down the time limits within which the companys annual general meeting must be held and the accounts should be sent to shareholders, etc.
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