Quality + value = certainty

Under the Corporations Act 2001, the following companies must be audited:

• Public companies
• Large proprietary companies (meeting two of: $50M+ revenue, $25M+ assets, 100+ employees)
• Foreign-controlled small proprietary companies
• Registered schemes, and
• Some smaller entities also require an audit because of their constitution, funding agreements, or stakeholder requirements such as some crowdfunded entities and registered clubs.

Every AFSL holder is required to lodge audited financial statements with ASIC annually, regardless of size, structure, or activity level – this is an obligation under section 989B of the Corporations Act 2001 and applies to the licensee entity itself.

The lodgement is made up of three documents:

• Form FS70 - AFSL Profit and Loss Statement and Balance Sheet
• Form FS71 - Auditor's Report on AFS Licensee
• The licensee's audited financial statements for the financial year

Timing depends on whether the licensee holds client money or property:

• Licensees that hold client money or property must lodge within three months of the financial year-end.
• Licensees that do not hold client money or property must lodge within four months of the financial year-end.

For a 30 June year-end, that means lodgement deadlines of 30 September or 31 October respectively. Audit work typically needs to begin 6-8 weeks before the lodgement deadline, which means engaging an auditor and providing draft financial statements no later than early August for a 30 June year-end.

What the audit covers:

• The audit is not a generic financial statement audit - it includes specific obligations under ASIC's regulatory regime. The auditor must form an opinion on the financial report under Australian Auditing Standards, and separately address the licensee's compliance with:
  • Section 912A(1) general obligations, including the obligation to have adequate financial resources
  • Client money obligations under Part 7.8 of the Corporations Act and the Client Money Reporting Rules, where applicable
  • Financial requirements in the licence conditions (which vary by licence authorisation and may include net tangible assets, cash needs, surplus liquid funds, or adjusted surplus liquid funds tests)
  • Reportable situations regime under section 912DAA - the licensee's compliance with breach reporting obligations.

Common areas of audit focus:

For most licensees, the issues that drive audit hours are the financial resource requirements (particularly NTA calculations, which involve specific exclusions and judgments that catch many licensees out), client money reconciliation and segregation, related-party arrangements (especially in licensees that are part of a broader group), revenue recognition for advice fees, brokerage, and trailing commission income, and the reportable situations register and breach assessment process.

Consequences of late or non-lodgement:

Late lodgement triggers automatic late fees and is recorded against the licensee on ASIC's public register. Repeated late lodgement, or failure to lodge, can result in additional licence conditions, a formal request for information, or in serious cases licence suspension or cancellation. ASIC has been visibly more active on AFSL surveillance since 2021 - this is not an obligation to leave until late August.

Hayes Knight audits AFSL holders across financial advice, broking, funds management, corporate advisory, and authorised representative networks. We work with licensees ranging from boutique single-authorisation advice practices to multi-authorisation groups with client money handling and complex revenue arrangements.

For most private companies and NFPs, work and reporting takes 4–8 weeks from when complete records are provided, depending on the entity's size, complexity, and the quality of its records. Statutory audits with hard deadlines (AFSL, MIS) are planned around the lodgement date. We agree timelines upfront and tell you immediately if anything threatens to slip.

Audit fees depend on entity size, complexity, internal control quality, and the standards applicable to the engagement. We provide fixed fee quotes in writing after an initial scoping discussion. For ongoing engagements, fees are confirmed annually before work begins.

A Registered Company Auditor (RCA) is an individual auditor registered with ASIC under the Corporations Act 2001. Only RCAs can sign off on audits of companies, registered schemes, and AFSL holders.

Hayes Knight's audit directors Hemant Nisar and Mario Raciti are both Registered Company Auditors.

Yes, thank you for asking.

Hayes Knight serves clients across Australia, and we regularly work with international entities with Australian subsidiaries, and Australian entities with international subsidiaries, with audit work performed on-site or remotely depending on the engagement. Through our membership of Morison Global, we also coordinate audits for clients with international operations or foreign parent reporting requirements.

Foreign-controlled small proprietary companies are generally required to prepare and lodge audited financial statements with ASIC under Part 2M.3 of the Corporations Act, even where domestic small proprietary companies would not.

Relief is available under ASIC Corporations (Foreign-Controlled Company Reports) Instrument 2017/204 and related instruments but qualifying for relief requires the foreign parent's accounts to be consolidated and lodged with an equivalent overseas regulator, and specific notification requirements must be met.

We regularly help foreign parents either qualify for relief or set up the audit relationship efficiently.

For registered managed investment schemes, two separate audits are required annually under the Corporations Act 2001:

• A financial report audit of the scheme's financial statements under Chapter 2M, providing reasonable assurance to members and ASIC that the financial report gives a true and fair view and complies with Australian Accounting Standards.
• A compliance plan audit under section 601HG, providing assurance that the responsible entity has complied with the scheme's compliance plan and that the plan continues to meet the requirements of the Act.

Both must be performed by a Registered Company Auditor, lodged with ASIC within three months of the financial year-end (Form 388 with the financial report and audit reports attached), and made available to members.

For unregistered wholesale funds (typically wholesale unit trusts, IDPS-like structures, or wholesale limited partnerships operating under section 601ED exemptions), there is no statutory audit requirement under the Corporations Act. In practice, however, most are audited because:

• The trust deed or limited partnership agreement requires it
• The Information Memorandum or PDS commits to audited annual financial statements
• Institutional or sophisticated investors require audited accounts as a condition of investment
• Side letters with cornerstone investors mandate audit
• The RE or trustee wants the independent assurance as part of its own governance and AFSL compliance posture

For both registered and unregistered structures, the audit scope typically includes testing of unit pricing and the application of the constitution's pricing formula, valuation of underlying assets (particularly important for unlisted property, infrastructure, private credit, and venture/PE funds where valuations are inherently judgmental), related-party transactions including RE fees and any cross-holdings, application of fees and expenses against the constitution, custodian reconciliation, distribution calculations and member equalisation, and compliance with investment mandate restrictions disclosed in the PDS or IM.

The compliance plan audit (registered schemes only) is a separate engagement that tests whether the RE has actually followed the compliance plan over the year - things like related-party approval processes, member reporting obligations, custodian appointments, and breach reporting. Many REs underestimate this engagement; ASIC has been increasingly attentive to compliance plan adequacy and execution since the Hayne Royal Commission.

Hayes Knight audits both registered managed investment schemes and unregistered wholesale funds, including property trusts, private credit funds, venture and growth equity funds, infrastructure funds, and fund-of-funds structures. We work closely with responsible entities, trustees, custodians, and administrators to deliver audits that meet statutory timing without disrupting fund operations.

For most early stage Australian companies, audited financial statements are not legally required but the point at which they become required often arrives sooner than founders expect, and the point at which they're commercially worth doing voluntarily usually arrives earlier still.

An audit is required when you hit the mandatory thresholds or functions (see When does an Australian business need to lodge a financial statement audit with ASIC?), prepare for a major liquidity event (like a sale or IPO), or when external stakeholder, like banks, venture capitalists, or government grant provider, require verified financial assurance. For example:

• You've converted to an unlisted public company (often a step toward IPO or crowd-sourced funding).
• You've raised more than $3 million through a crowd-sourced funding offer.
• You hold an AFSL, are a registered managed investment scheme, or are subject to industry-specific audit requirements (some health, education, and government-contracted entities).
• Your constitution, shareholders' agreement, or loan covenants require it - worth checking, especially after a Series B or C, because institutional investor documents frequently impose audit requirements that go beyond the Corporations Act.

Voluntary audits are commercially worthwhile when:

• You're 6-12 months out from a meaningful capital raise. Sophisticated investors increasingly expect reviewed accounts at Series B and audited accounts at Series C and beyond. Going into due diligence with audit history shortens timelines, reduces the “discount for uncertainty” sophisticated investors apply when financial information is unverified, and removes a category of last-minute deal friction. The cost of an audit is almost always less than the valuation cost of not having one.
• You're 18-24 months out from an IPO or trade sale. Most ASX listings require three years of audited financial statements in the prospectus. If you list in two years, you need historical audits done now. Retrospective audits are possible but materially more expensive, more disruptive, and more likely to surface accounting issues that should have been resolved earlier.
• You have a complex cap table or convertible instruments. SAFE notes, convertible notes, preference shares with liquidation preferences, and share-based payment arrangements all involve accounting judgments that auditors test rigorously. Having those judgments tested annually — rather than discovered at a deal - prevents painful restatements during due diligence.
• You're applying for venture debt or a meaningful banking facility. Most lenders above modest facility sizes require audited accounts as a covenant.
• You operate in a regulated industry or rely on grant funding. Fintech, healthtech, and government-funded sectors often face audit requirements from regulators or funding bodies that aren't triggered by the Corporations Act.
• You have independent directors carrying personal liability. Independent directors increasingly request audited accounts as part of their own governance comfort, particularly post-Hayne.

Companies that engage early avoid cost shocks and operational disruption of a first audit performed under pressure. The cheapest audit you'll ever do is the second one. The most expensive is the first three weeks before a term sheet expires.

A scoping conversation tells you whether you need to act now, plan for the next financial year, or revisit in 12 months. It's the cheapest piece of advice a growth-stage CFO can get.

It depends on the entity's size and registration. ACNC registered charities classified as "large" (annual revenue over $3 million) must be audited; "medium" charities (revenue $500,000–$3 million) may have either an audit or a review; "small" charities have no mandatory requirement but may need one under their constitution or funding agreements. Different rules apply to incorporated associations (state-based), companies limited by guarantee, and registered organisations under the Fair Work (Registered Organisations) Act.