Company Auditor Explained | Roles, Requirements & Responsibilities

What Is a Company Auditor?

A Registered Company Auditor is a professional auditor who is registered with ASIC allowing them to accept assurance engagements. This auditor must be an independent, qualified professional meeting RG 180 qualifications and experience requirements which ASIC will monitor and verify.

Once licensed the auditor can then assist clients by examining a company’s financial records and other documents in order to provide an independent and objective opinion on whether they present a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001.

When we have clients search for a “company auditor”, they are typically seeking to either engage an audit firm such as ours for an upcoming audit or to understand what we actually do and why they might be asked to engage them. In this blog we work through what an auditor does, when and why it may be required and what value they can add beyond the statutory requirements.

What Does a Company Auditor Do?

Although all auditors in Australia are licensed as Registered Company Auditors that does not mean they all focus purely on company audits. The same qualification also applies to ACNC audits and other regulatory and statutory audits regardless of the type of entity in question.

Regardless of the type of organization being audited, the primary responsibility of an auditor is to form an independent opinion on a company’s financial statements which requires them to:

• Conduct an in-depth examination of the accounting records and financial data
• Review the financial statements and determine whether they comply appropriately with the Australian Accounting Standards
• Assess the existence and adequacy of the internal controls and documented financial processes
• Exercise professional skepticism in looking for material misstatements or inconsistencies in the disclosures
• Reporting their findings via an audit report to stakeholders

When Is a Company Auditor Required?

There is no general requirement for companies/private businesses to be audited in Australia. However, depending on the size and activities of the business, ASIC may direct a company to be audited, or it may be an annual requirement in certain circumstances such as:

• The company is a public company when listed or unlisted
• The company has revenue, asset or staffing levels that have tipped it over the threshold to be classified as a large proprietary company unless ASIC has specifically granted audit relief
• The company has an Australian Financial Services License or other government license requiring it to have an audit
• It is a not for profit or charity that is of a size that the ACNC requires it to be audited
• The constitution of the business or not for profit requires it to be audited often due to investor requirements
• A private lender has required an annual audit as part of their debt covenants

Legal Framework for Company Auditors in Australia

Registered Company Auditors are licensed and managed by the Australia Securities and Investments Commission (ASIC) and are required to operate under a very strict legal and regulatory framework to ensure stakeholders can have confidence in the audit profession. These duties and responsibilities are documented in various standards and legislation including the Corporations Act 2001 and the Australian Auditing Standards.

Of key importance to remember is that an auditor is not engaged to act in the interests of management (despite them being the ones signing the engagement letter and paying the bills) but rather in the interests of the external stakeholders such as regulatory agencies and shareholders.

Independence of a Company Auditor

The cornerstone of auditing is that the audit firm must be independent of the client. This independence is broad and designed to ensure the process is free from conflicts of interest whether perceived or actual and any other threat that could compromise objectivity.

In practical terms this means that a company auditor should never audit a company that they control, manage or provide advisory or board level services too. They should not have any financial interest in the company and should work hard to avoid any relationships with the company which could be perceived to impair independence.

The Company Audit Process

The audit process itself is quite different depending on the engagement and the size, complexity, industry and risk profile of the entity being audited. However, the four primary steps below will need to be undertaken in every audit to varying degrees depending on the scope of the engagement:

• Audit Planning – This is where the audit team will review the entity and plan for how the audit will be conducted and a risk profile created.
• Risk Assessment – A review of the financial and operational risks of the entity which will change the level of testing required.
• Testing of Evidence – Gathering and testing evidence such as source documents, internal controls, documented procedures, confirming balances and legal risks for third parties etc.
• Audit Opinion – Issuing an audit report which provides either an unqualified (clean) opinion, a qualified opinion, an adverse opinion or a disclaimer of opinion.

Common Myths About Company Auditors

“Auditors guarantee there is no fraud”

This is absolutely not the case and would be an impossible standard for any firm to try to meet. An auditor provides a reasonable level of assurance but not certainty. For 99% of financial audits forensic investigations are not actually within scope and thus there is no focus on fraud.

“Auditors work for management”

Although management are naturally the ones who are engaging with and appointing the audit firm that firm is then required to act independently in the interests of stakeholders, not management.

“Audits are only about compliance”

Most audits actually start with governance and whether there are sufficient documented records to show financial discipline within an organization.

Need a Company Auditor?

At Auditors Australia we are proud to be a niche, audit only company, providing independent high level audit services across a range of industries and regulatory environments. Our team is passionate about the assurance industry and support clients nationally to meet their audit obligations efficiently and with confidence.

Contact Auditors Australia to discuss your audit requirements and engage professional auditors you can trust.