A private company becomes a large proprietary company when the company satisfies at least two of the following:
- Revenue is greater than $25 million;
- Gross assets at year- end is $12.5 million or more;
- The coy. Has 50 or more employees at year end.
The immediate effect of becoming a large private company is that the company is required to prepare general purpose financial statements and have those financial statements audited.
ASIC may still grant relief from audit under Instrument 2016/784 as the company has not previously been audited and:
- The director’ declaration for the current financial year contains an unqualified statement that there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due.
- The company made a net profit after tax for the current financial year or immediate preceding year (i.e. the company cannot have two consecutive ‘loss’ years).
- The directors have passed a unanimous resolution (for each year of audit relief), within 3 months before the start of the financial year and 4 months after the end of the financial year, that the annual report for the financial year should not be audited.
- The members of the company (shareholders) hold exactly the same meetings as described above for the directors.
- The company prepares management accounts within one month after each quarter and the directors resolve within one month after the end of every quarter that the total liabilities of the company do not exceed 70% of total tangible assets and that the company can pay its debts when they become due and payable.
- There are another few requirements not needed to be discussed here.
As a condition for obtaining audit relief the company must lodge Form 382 to ASIC within 3 months before the start of the financial year and within 4 months after the end of the financial year, in relation to the first year of audit relief.
If you have a private company that wishes to use this strategy, we would be happy to be of assistance. If you still wish to have the audit, we will need to discuss some relevant issues regarding audit requirements with you and the relevant people within the company before the signing of the Audit Engagement Letter.
Please call either Peter Landers or Marc Reiffel at Peter A. Landers & Co (now PAL Accounting & Advisory) on 03-52210779 if you wish to obtain some clarification on the above.