Large and growing proprietary (private) companies should regard audit requirements as a business health check, rather than a compliance burden to avoid.
Rather than being an unnecessary ‘tick the box’, an audit makes good business sense as both an assurance and strategic tool.
The Australian Securities and Investment Commission (ASIC) has criteria which determine if a proprietary company is classified as large. A company may automatically have compliance obligations, including the need for annual audits, if it meets two of the following conditions:
- annual revenue of $50 million or more;
- gross assets of $25 million or more;
- 100 or more employees.
In some cases, proprietary companies that qualified as ‘large’ could apply for audit relief but that may not necessarily be regarded as the best option.
The audit process can provide comfort to large proprietary company owners that everything is being done correctly – think of it as an extra set of eyes taking a deeper look at what is going on beyond day-to-day cash management. An audit will provide validation on financial systems and how they are being used, as well as identify potential risks and if additional internal controls are needed.
When we audit larger proprietary companies, we look beyond the day-to-day operations and cash flow, we look at all financial aspects of the business and can identify deficiencies and opportunities for efficiency.
In some cases, owners are surprised to find the amount of employee entitlements and other obligations on their books which can paint a better picture of the overall health of a business. An audit could also be valuable for business owners when it comes to their own exit strategy or potential expansion through capital raising. Audited accounts add credibility and can demonstrate a business is investor ready.
No one starts a big business; they begin small – so the mindset and thinking needs to match that as a company grows and an audit can be part of that evolutionary step.
This article first appeared in the Spring 2021 issue of HLB Mann Judd’s Client Alert.