Accounting statutory obligations

1. Accounting statutory obligations Learning objectives To learn the compliance requirements of the Corporations Act 2001. To learn the compliance requirements of applicable accounting standards within Australia. To understand audit requirements and other statutory obligations.

2. accounting standards audit committees auditing auditing standards company policy corporate governance Corporations Act disclosing entity independent auditor industry codes of practice internal auditor Listing Rules reporting entity securities Trade Practices Act key terms

3. The Corporations Act • Provides for limited liability companies and their listing with ASX • Categorises public and proprietary companies • Distinguishes between small and large proprietary companies • Provides financial reporting and audit requirements • Administered by ASIC

4. Financial reporting and audit requirements • Proper financial records are maintained • A financial report to be prepared at the end of each financial year • Financial statements to give a ‘true and fair view’ of company’s financial position • The financial report must comply with accounting standards

5. Financial reports Must contain: • Statement of financial performance • Statement of financial position • Statement of cash flows • Notes to the accounts • Directors’ declaration • Audit report

6. Small and large proprietary companies A small proprietary company must satisfy two of the following criteria: • gross operating revenue for the year is less than $10 million • value of gross assets at year end is less than $5 million • fewer than 50 employees at year end A company that does not satisfy two of these criteria is a large proprietary company

7. Australian Stock Exchange - ASX The primary role of a stock exchange is to provide and maintain a market for trading securities that is: • fair and efficient • well-informed • internationally competitive • will secure investor confidence

8. ASX Listing Rules • ASX is required by the Corporations Act to make Listing Rules: • listed companies must comply with these Listing Rules • Listing Rules protect public interest • Listing Rules ensure trading is orderly and efficient • Listed companies are required to provide: • half-yearly financial reports • preliminary financial reports • audited financial reports

9. Australian accounting standards • Developed and maintained by AASB • AASB is also developing the Statements of Accounting Concepts (SACs) • SACs provide the framework for general purpose financial reporting • SACs are used to develop and revise accounting standards • Reporting entities must prepare financial accounts that comply with the accounting standards

10. Australian accounting standards AASBs and the AAS provide the procedures and practices for recording financial transactions Examples: • AASB1001 Accounting Policies • AASB 1002 Events Occurring after Reporting Date • AASB1004 Revenue • AASB1008 Leases • AASB1018 Statement of Financial Performance • AASB1019 Inventories

11. Corporate governance • Manner in which organisations are controlled and governed by the board of directors • Shareholders, directors and auditors all play important roles in corporate governance • Directors are required to publicly disclose their corporate governance practices on: • risk management • internal controls

12. Audit committees • A subcommittee of the board of directors • Comprises non-executive directors • Represents owners rather than management • Supervises: • financial reporting • audit process • Deals with the external auditor

13. Audit • Financial auditing is the independent examination and evaluation of an entity’s financial information with the view to expressing an opinion • Auditor must be: • independent • competent

14. Auditor’s opinion The Corporations Act requires the auditor to report on whether the financial statements: • are properly drawn up in accordance with applicable accounting standards • give a ‘true and fair view’ of the company’s financial position • comply with the Corporations Act and other statutory regulations

15. Auditing standards • Provide a framework and guidelines for the audit • Advise on practices and procedures to be followed during an audit • Instructs auditors to have: • integrity • objectivity • independence • confidentiality • skill and competence

16. Types of auditors • Independent auditors: • render professional services on a fee-for-service basis • Government auditors: • employees of the government • audit matters relating to compliance, efficiency and effectiveness of operations • Internal auditors: • employees of the organisation • duties relate to internal control system

17. The role of the internal auditor • Review and appraise internal control system • Ascertain compliance with established policies, plans and procedures • Safeguard the organisation’s assets • Appraise quality of employees’ performance in carrying out assigned responsibilities

18. Other regulations on business • Industry codes of practice • The Trade Practices Act • Superannuation levy • Workers compensation insurance • Occupational health and safety • Australian Tax Act • Industrial Relations Act 1999