The Regulator: Called to Account

Has your organisation got its financials in order? ASIC Commissioner John Price outlines what companies need to know.

It’s that time of year when companies with a year end of 31 December must lodge financial accounts with ASIC. Financial reporting can be a complex area, but it provides vital information to members, creditors and others that enable them to make decisions when dealing with an entity and it’s important to get it right.

Who should lodge?

Last financial year, approximately 28,000 entities were required to produce financial reports, including 2,000 listed entities (excluding foreign companies) and 26,000 unlisted entities.

Companies with a 31 December year-end date that are required to lodge their financial reports with ASIC must do so within three or four months after the end of their financial year (that is, either by 31 March or 30 April), depending on the type of company.

The preparation of the reports involved 4364 registered company auditors and 6341 self-managed superannuation fund auditors.

Unless the entity is a company limited by guarantee with consolidated revenue of less than $1 million or ASIC grants relief, the financial reports must be audited. Reports can be lodged online via the ASIC website. If your company is listed on the Australian Securities Exchange, it may need to lodge through the ASX instead.

Compliance issues

The commission regulates compliance with financial reporting and auditing requirements as set out in the Corporations Act 2001 (Cth). Last financial year, ASIC reviewed more than 320 financial reports of listed and other public-interest entities. As a result of our surveillance, 11 entities recognised asset impairments and other writedowns totalling $937m.

We are also responsible for the registration of auditors, their compliance with auditor duties and the auditing requirements that are set out under the Corporations Act.

Reminder and compliance programs

ASIC seeks to ensure those that need to lodge financial reports do so and those that audit financial statements meet our requirements. Our active monitoring of compliance relating to financial accounts contributes directly to market integrity and investor confidence. We conduct frequent audits of our register and will contact companies that have not lodged their financial reports or that we believe have provided incorrect information.

If you receive a letter from ASIC, you need to comply with the request. This could include answering any questions about your company information, lodging company documents or confirming your current information. If you don’t respond, we may take further action, which may include further warning notices, court action or deregistration. If you don’t meet your obligations, we can also apply for a court order to ensure the documents are lodged. Further failure to comply may result in fines or even imprisonment.

When a company fails to comply with its obligations to lodge annual financial reports, ASIC may take enforcement action. Failing to lodge annual financial reports is a criminal offence and each year that a company fails to lodge its annual financial report carries a fine of up to $12,600.

How to find and lodge financial reports

Financial reports are lodged into ASIC’s public registers and are available for searching by government and the public. Parties who may have an interest in accessing a copy of a financial report include investors, researchers, regulators, the media, customers, suppliers and other stakeholders. In fact, financial reports are our most highly searched document type (more than 27,000 in the 2016/17 financial year). They can be found online here.

ASIC also provides guidance to companies about the lodgement of financial reports — including when, who and how. For more information about preparing and lodging with us, see here.

A final word

Financial reporting can be a complex area, but it’s an essential part of running a company. I encourage you to understand your obligations and seek answers to any questions you may have. These reports provide important information to members, creditors and others, enabling them to make decisions when dealing with an entity.

Active monitoring of compliance relating to financial accounts contributes directly to market integrity and investor confidence.