On 26 August 2010, the Australian Securities and Investments Commission (ASIC) issued Class Order 10/545, which amends ASIC Class Order 98/1417 Audit Relief for Proprietary Companies (Class Order).
A large proprietary company or a small proprietary company, which is controlled by a foreign company, may be eligible to apply for relief under the Class Order from the requirement to have the company’s financial reports audited in accordance with the provisions of the Corporations Act 2001 (Cth).
At present, proprietary companies which apply the relief available under the Class Order are required to lodge Form 382 with ASIC for each financial year in which the company applies the relief. This requirement has been amended by Class Order 10/545.
The two primary effects of the amending class order are:
- proprietary companies which are eligible for relief under the Class Order will only be required to lodge Form 382 with ASIC in respect of the first financial year in which they apply (or reapply) the relief, rather than for each consecutive year they apply the relief, and
- proprietary companies that have previously applied the relief under the Class Order must lodge Form 396 with ASIC at the time they cease to apply the relief. The requirement to lodge Form 396 only applies to companies that ceased to apply the relief after 1 July 2010.
Effect of the Class Order
Under the Class Order, ASIC has the power to relieve eligible companies from the requirement to:
- appoint an auditor
- have the company’s financial report audited
- lodge an auditor’s report with ASIC
- provide an auditor’s report to shareholders, and
- provide a statement by the auditor in relation to any concise financial reporting
ASIC has the power to do the above where it is satisfied that compliance would:
- be misleading
- be inappropriate considering the circumstances of the company, or
- impose an unreasonable burden on the company, its officers or the auditor.
ASIC regulatory guide 115 Audit relief for Proprietary Companies sets out ASIC’s policy on determining whether the audit obligations would create an unreasonable burden for the company. Pursuant to regulatory guide 115, ASIC will consider:
- the expected costs and benefits of complying with the audit requirements
- any particular circumstances that would make effective compliance difficult
- any unusual aspects of the company’s operations during the relevant financial year that would make compliance unreasonable, and
- any other relevant matters.