Reporting to shareholders and regulators

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Reporting to shareholders and regulators

MODULE 4 | 4.4.2 | STUDENT COMPANION

Under the Corporations Act the auditor forms opinions on the financial report, on the information and

explanations received and on the company's records, reporting on the information and the records only

by exception. At a listed company's annual general meeting, the auditor attends and answers members'

questions. And the auditor must notify ASIC in writing, as soon as practicable and within 28 days, when

there are reasonable grounds to suspect a significant contravention, a contravention that won't be

adequately dealt with otherwise, or an attempt to mislead or interfere with the audit.

What the Corporations Act adds to the report

The auditor must form an opinion on (s307) What then goes into the report (s308)

(a) The financial report complies with the Act,

including the accounting standards, and gives a

true and fair view

Report the opinion to the members

If not of that opinion, say why (s308(1))

A particular accounting standard not followed?

Quantify the effect where practicable, or say why it can't be done (s308(2))

Any defect or irregularity in the financial report

Describe it (s308(3)(a))

(b) The auditor was given all the information,

explanations and assistance the audit needed

(c) The company kept financial records sufficient for a

financial report to be prepared and audited

(d) It kept the other records and registers the Act

requires

By exception

Describe any deficiency, failure or shortcoming in (b), (c) or (d), such as

missing records or information that wasn't provided (s308(3)(b))

Silence on (b), (c) and (d) means the auditor found nothing to report: the Act adds this layer on top of the auditing standards.

At the annual general meeting

Attendance: the auditor of a listed company, or a suitably qualified member of the audit team who can answer

questions, must attend the AGM at which the auditor's report is considered (s250RA).

Questions: before the meeting, members may submit written questions to the auditor about the content of the

auditor's report or the conduct of the audit, no later than five business days before the AGM (s250PA). At the

meeting, the chair must give members a reasonable opportunity to ask the auditor about the conduct of the

audit, the preparation and content of the report, the accounting policies adopted and the auditor's independence

(s250T). It is one of the few moments when the people the audit is for can question the auditor directly.

ADVANCED AUDIT AND ASSURANCE | M4 | 4.4.2 | STUDENT COMPANION

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Reporting to ASIC under section 311

Reasonable grounds to suspect a

contravention of the Act? Is it significant?Yes

Dealt with adequately by commenting in

the auditor's report or telling the directors?

No

Yes: deal with it that way, and document

why

Yes

Judging significance

The penalty; the effect on the financial

position, or on the information about it; and

other factors, such as seniority, dishonesty,

repeated or systemic conduct and harm to

investors or creditors (s311(4); RG 34)

Any attempt to unduly influence, coerce, manipulate or mislead anyone involved in the audit, or

to otherwise interfere with it? No significance test applies.

NOTIFY ASIC IN WRITING

As soon as practicable, and in

any case within 28 days of

becoming aware of the

circumstances

Yes

No

Yes

Reasonable grounds to suspect, not proof: no exhaustive investigation is needed. Qualified privilege (s1289) protects a report made in good faith,

without malice, from defamation claims.

Section 311 in practice

Point What it means

Threshold Reasonable grounds to suspect: facts that would give a reasonable auditor an honest

suspicion. No exhaustive investigation, and no evidence fit for a criminal court, is needed

Significance The Act points to the penalty and the effect on the financial position, or on the information

about it (s311(4)). ASIC's guide adds factors such as seniority, dishonesty, repeated or

systemic conduct and harm to others, and treats insolvent trading, breaches of officers' duties

or the accounting standards, related party breaches and failures to keep records as likely to be

significant

Timing As soon as practicable, and in any case within 28 days of becoming aware, even if the matter

is fixed in the meantime; don't wait for the end of the audit

Confidentiality Gives way where the law requires disclosure. Qualified privilege (s1289) protects a report

made in good faith and without malice from defamation claims; it isn't protection from all legal

action

Other regulators Auditors of banks, insurers and superannuation funds have duties to the prudential regulator,

APRA; overseas listings can bring duties to foreign regulators. When the position is unclear,

take legal advice

ADVANCED AUDIT AND ASSURANCE | M4 | 4.4.2 | STUDENT COMPANION

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Must Linden Ridge notify ASIC?

Reasonable grounds to suspect The CFO posted revenue journals for installations that hadn't happened

The CFO gave the team misleading answers about them

The CFO failed to disclose a business owned by a family member, paid above-market rates under the

CFO's own approval

An attempt to mislead the auditor?

Yes: reportable in its own right, with no

significance test

A significant contravention?

Yes: suspected breaches of an officer's duties

are significant

The audit committee is investigating. Does

that change it?

No: it doesn't remove the duty, and waiting for

the outcome could take the auditor past the 28

days

So the engagement partner, after taking legal advice and informing the audit committee, notifies ASIC in writing within the 28 days, describing the

circumstances and the evidence, and documents the decision.

The answer to the opening question: the board's investigation is welcome, but it runs alongside the auditor's

legal duty, not in place of it.

Sources: Corporations Act 2001, ss 250PA, 250RA, 250T, 307, 308, 311 and 1289; ASIC Regulatory Guide 34, Auditor obligations:

Reporting to ASIC (September 2025).

Module 4 in one table: completing Voltana's audit

Lesson What was decided

4.1.1 Significant areas and litigation Supplier claim: the $1.4 million provision is supported; the class action is a

contingent liability, disclosed

4.1.2 Going concern A signed, credit-approved offer extends the facility to 2029: no material

uncertainty

4.1.3 Representations and subsequent

events

A partner electrician's liquidation is adjusting (an extra allowance of about

$200,000); the $8 million recycling acquisition is non-adjusting and disclosed

4.1.4 Final analytics Revenue within about 1% of the expectation; the freight jump explained by air

freight

4.2.1 Final evaluation Uncorrected misstatements of about $190,000: not material

4.2.2 Final review and opinion Engagement quality review completed 24 August; report dated 25 August

2026

4.3 The auditor's report Unmodified, with two key audit matters; the chair's letter corrected

4.4 Communications and reporting Significant deficiencies reported to the audit committee; ASIC notified under

s311

See also: the Exam Reference Pack, page 11, on who to tell inside the entity and outside it.

ADVANCED AUDIT AND ASSURANCE | M4 | 4.4.2 | STUDENT COMPANION

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Practice questions

MODULE 4 | 4.4.2 | TRY THESE BEFORE THE WORKED ANSWERS

Question 1 - Report to ASIC?

Jacaranda Holiday Parks Ltd (imagined) is a listed company that runs holiday parks. Its audit produced these

four findings. For each, say whether the auditor must report to ASIC, and why.

Finding at Jacaranda Holiday Parks Ltd Report to ASIC? Why

(a) The company lent $400,000 to one of its directors. No

members' approval was obtained, and no exception

applies.

(b) The company lodged notice of a change to its

registered office address with ASIC two weeks late; the

directors have since put it right.

(c) The finance manager altered supplier invoices before

giving copies to the audit team, to hide late payment

penalties.

(d) For three months the company hasn't paid its suppliers

on time and the bank has refused more credit, yet it keeps

ordering on credit.

ADVANCED AUDIT AND ASSURANCE | M4 | 4.4.2 | STUDENT COMPANION

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Question 2 - Missing financial records

Boobook Bore Drilling Pty Ltd (imagined), a large proprietary company that drills water bores for farms, lost most

of its accounting records for the second half of the year when it changed bookkeepers, and couldn't rebuild

them. List what the auditor's report must say.

Question 3 - Ready for the AGM

This year Jacaranda's auditor's report includes a key audit matter on the valuation of its holiday parks and a

Material Uncertainty Related to Going Concern section. Identify three questions shareholders are likely to ask

the auditor at the AGM, and outline your answer to each, keeping within what the auditor may properly discuss.

ADVANCED AUDIT AND ASSURANCE | M4 | 4.4.2 | STUDENT COMPANION

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Worked answers

MODULE 4 | 4.4.2 | WORKED ANSWERS - ATTEMPT THE QUESTIONS FIRST

Question 1 - Jacaranda's findings

Finding Report? Why

(a) Loan to a director Yes A financial benefit to a related party of a public company without

members' approval breaches a civil penalty provision: likely significant

(b) Late notice of address Not required Minor and already fixed: not significant, and adequately dealt with by

raising it with the directors. Document the reasoning

(c) Altered invoices Yes An attempt to mislead a person involved in the audit: reportable whatever

its size, and a suspected fraud for those charged with governance

(d) Buying on credit while

unable to pay

Yes Reasonable grounds to suspect insolvent trading, which ASIC treats as

significant; reassess going concern too

Question 2 - Boobook Bore Drilling: what the report must say

The opinion, and why it isn't unmodified: without records for half the year the auditor can't obtain sufficient

appropriate evidence, so the opinion is modified (qualified, or a disclaimer if the possible effects are

pervasive), and the report must say why the auditor isn't of the opinion that the financial report complies

(s308(1)). The basis section explains why the evidence couldn't be obtained.

The records deficiency: that the company didn't keep financial records sufficient to enable a financial report

to be prepared and audited, and any information or explanations not provided (s307(b) and (c), s308(3)(b)).

Any defect or irregularity found in the financial report (s308(3)(a)), and the quantified effect of any failure to

follow an accounting standard, where practicable (s308(2)).

Outside the report: failing to keep financial records is likely a significant contravention, so notify ASIC under

s311 within 28 days, and tell those charged with governance.

Question 3 - Preparing for Jacaranda's AGM

'Does the going concern section mean the company will fail?' No prediction: the section draws attention

to the directors' note; the auditor concluded the going concern basis is right while a material uncertainty

remains, and the opinion isn't modified because the uncertainty is adequately disclosed.

'How did you check the park valuations?' Describe the work set out in the key audit matter, such as

assessing the valuers' competence and objectivity and testing the key assumptions, and point to the valuation

note.

'Are you independent, given your firm's other work for the company?' Refer to the independence

declaration in the directors' report, the non-audit services and fees disclosed in the notes, and the rules on

rotation and prohibited services.

Keep within scope (s250T): the audit, the report, the accounting policies and independence. Don't disclose

confidential client information or answer for management's decisions.

ADVANCED AUDIT AND ASSURANCE | M4 | 4.4.2 | WORKED ANSWERS

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