Guide 3 of 5 · Company auditors
Registered company auditors: who the Corporations Act allows to audit
Under the Corporations Act 2001, an individual who agrees to be appointed auditor of a company, a registered scheme or a registrable superannuation entity, or acts as one, must be a registered company auditor (s 324BA), subject to an exception for proprietary companies. A firm needs at least one member who is a registered company auditor ordinarily resident in Australia or New Zealand (s 324BB), and a company must be an authorised audit company (s 324BC).
General information, not legal advice. The official place to check is ASIC’s page on applying for auditor or authorised audit company registration.
An individual, a firm or a company
Each of the three sections covers the same three acts: agreeing to be appointed auditor of a company, a registered scheme or a registrable superannuation entity; acting as its auditor; and preparing a report the Act requires a registered company auditor, or an auditor of one of those bodies, to prepare.
| Who acts | What the Act requires | Who contravenes |
|---|---|---|
| An individual (s 324BA) | Must be a registered company auditor, “Subject to section 324BD” | The individual |
| A firm (s 324BB) | At least 1 member is a registered company auditor “ordinarily resident in Australia or New Zealand” (s 324BB(5)); and the firm’s business name is on the Business Names Register, or a return in the prescribed form shows each member’s full name and address (s 324BB(6)) | A member of the firm: one who is aware of the circumstances (s 324BB(1)), or any member, as a strict liability offence (s 324BB(2), (3)), with a defence for a member who did not know, or who took all reasonable steps to correct it as soon as possible (s 324BB(4)) |
| A company (s 324BC) | Must be an authorised audit company | The company (s 324BC(1)), and its directors on the same pattern as a firm’s members (s 324BC(2), (3), (5)) |
For an authorised audit company, ASIC says the company must show it meets requirements on ownership and control, professional indemnity insurance, fit and proper directors and external administration.
Two exceptions
A proprietary company where a registered auditor is impracticable
Under s 324BD(1), an individual without registration as an auditor may be appointed as auditor of a proprietary company if all three of these hold:
- ASIC is satisfied that it is impracticable for the company to obtain the services of an individual, firm or company that could be appointed under ss 324BA to 324BC “because of the place where the company carries on business”;
- ASIC is satisfied that the individual is “suitably qualified or experienced”; and
- ASIC approves the individual for the audit of the company’s financial reports.
The appointment is subject to the terms and conditions of the approval, and the individual is then taken to be a registered company auditor for auditing that company’s financial reports (s 324BD(2)). ASIC may later amend, revoke or vary those terms, or end the appointment, by written notice to the company (s 324BD(3)).
A review for a company limited by guarantee
“(1) An individual is taken to be a registered company auditor for the purposes of a review of a financial report of a company limited by guarantee if the individual: (a) is a member of a professional accounting body; and (b) has a designation, in respect of that membership, prescribed by the regulations for the purposes of this paragraph.”
Corporations Act 2001, s 324BE(1)
Regulation 2M.4.01A of the Corporations Regulations 2001 prescribes six designations, in full: CA or FCA (Institute of Chartered Accountants in Australia), CPA or FCPA (CPA Australia), and FIPA or MIPA (Institute of Public Accountants). The exception covers a review, not an audit. The ACNC Act borrows it for reviews of medium charities, as the guide to charities, review or audit sets out.
How ASIC registers an auditor
“A natural person may make an application to ASIC for registration as an auditor”, lodged with ASIC, in the prescribed form and with the prescribed information (s 1279). ASIC must grant it if the applicant meets all three of the conditions in s 1280(2), and otherwise must refuse it:
- Qualifications. Under s 1280(2A): a degree, diploma or certificate from a prescribed university or other prescribed institution in Australia; passed examinations in a course of study in accountancy, including auditing, of not less than 3 years, and in commercial law, including company law, of not less than 2 years; and a prescribed auditing course, satisfactorily completed. Or, under s 1280(2B), other qualifications and experience that ASIC considers equivalent.
- Competency or experience. All the components of an auditing competency standard approved by ASIC under s 1280A, or the practical experience in auditing that is prescribed.
- Capable, and fit and proper. ASIC is satisfied the applicant “is capable of performing the duties of an auditor and is otherwise a fit and proper person to be registered as an auditor”.
ASIC must not register a person disqualified from managing corporations under Part 2D.6 (s 1280(3)). It may refuse a person “not resident in Australia or New Zealand” (s 1280(4)). ASIC’s application page says resident in Australia; the Act’s words include New Zealand.
Before refusing, ASIC must give the person an opportunity to appear at a hearing and make submissions (s 1280(8)), and it must give written reasons within 14 days of a refusal (s 1280(9)). A registration runs from the day on the certificate ASIC issues until it is cancelled by ASIC or the Board, or the person dies (s 1280(5), (7)). Separately, an Auditor-General, and a person exercising that office, is taken to be registered, and so is a person to whom an Auditor-General delegates an audit, for that audit under Chapter 2M (s 1281).
Applying, as ASIC describes it
- ASIC assesses only complete applications: every supporting document is lodged at the same time as the electronic application, and an incomplete one is returned.
- Applications can be lodged online through ASIC’s auditor portal.
- ASIC aims to assess a complete application within 28 days of receiving it, and says it may take longer depending on its complexity or a request for more information.
What registration does not settle
Registration settles who may act, not whether a body needs an audit at all. For companies that turns on other provisions; ASIC says, for example, that a large proprietary company’s accounts must be audited unless ASIC grants relief. The rules on conflicts of interest and on how long one person may stay on the audit of a listed company, a listed registered scheme or a registrable superannuation entity are in the guide to conflicts and rotation, and the two state association schemes, which name their own auditors, are in the guide to incorporated associations by tier.