AFSL AuditsWhat is a Financial Licensee or AFSL Audit and are you complying with the Australian Financial Services Licensee requirements? 

With regulations and reporting obligations constantly changing, you will want to ensure that you remain compliant as an Australian Financial Services Licensee (AFSL). One of the conditions of your licenceis to have your financial statements audited and lodged each year, as well as other compliance requirements outlined in the Act, mainly relating to cash flow and reserves.

While these audits are mandatory, they can also provide you with the assurance that you ar not only compliant, but to provide further advice on how to improve internal controls within your business. In this article, we’ll share with you what you should expect in an AFSL audit and what documents you should prepare to complete this process.

How is an AFSL Audit completed?

The audit of an Australian Financial Services Licensee is carried out in a two-step process.

Step one involves auditing your financial statements, which will be carried out in conformity with the Australian Accounting Standards, Australian Auditing Standards, and ASIC Regulatory Guide 85. As of June 2022, AFSLs are required to produce a minimum of Tier 2 General Purpose Financial Statements. This means that, while normally profit & loss and balance sheets were previously required, there are further additions under the Accounting Standards that are also required. These include:

  • Statement of financial position (balance sheet)
  • Statement of financial performance (profit & loss)
  • Statement of changes in equity
  • Statement of cash flows
  • Notes to the financial statements

The auditor will check and will provide their opinion on whether these statements are present a true and fair view in accordance with both the Australian Accounting Standards and with ASIC regulations.

When lodging with ASIC, you will need to provide a copy of these financial reports, which will be attached to the Form FS70, as well as an audit report. Only the details of the profit & loss and balance sheet will need to be entered into the online portal. As the licensee, you are the one who will complete the form.

Download the FS70 form here.

Step two of the process is an audit on compliance in relation to the Corporations Act. This step, along with the first step will allow the auditor to complete and sign off the Form FS71, which you, as the licensee, will have to lodge with ASIC.

Download the FS71 form here.

At the end of the whole auditing period, the auditor will discuss any issues before preparing their audit report for both the financial statements and the FS71.

During the AFSL audit, your auditor may request a meeting with relevant managers or directors. You may also have to submit various documents for your auditor to complete a compliance review. Some examples of documents that may be requested by the auditor include the following:

  • Documents relating to training, supervision, and monitoring of representatives
  • Previous ASIC reporting and lodgements
  • Client service and advice
  • Product research and approved products
  • Financial management and audit processes and reports
  • Compliance management
  • Anti-Money Laundering/Counter-terrorism Financing policies
  • Privacy polices
  • Organisational capacity and structure
  • Records management
  • Risk management

What must be lodged with ASIC?

Knowing which documents you must submit to ASIC will help to prevent late lodgement fees and other possible breaches and penalties. You can refer to the table below to check what documents you need to lodge based on your circumstances.

Form FS70 –        profit and loss statement and balance sheet
Form FS71 –        audit report prepared and signed by the licensee’s auditor
Form FS76

(this form only applies to Limited AFSL holders)

–        annual compliance certificate

–        certifications relating to client money, training, conflicts of interest, dispute resolution and risk management

Form 388

 

(this form only applies to certain AFSL holders in special circumstances that include:

–        trust which are disclosing entities;

–        registered schemes;

–        public companies;

–        large proprietary companies;

–        and small proprietary foreign-controlled companies.)

–        copy of financial reports as well as auditor reports and registered auditor information.

 

Tip: You must ensure that you double-check and review all forms before submitting them to ASIC. ASIC usually require you to manually enter data from your financial reports and it is essential that they match to avoid follow up.

When should an AFSL Audit be completed and forms lodged with ASIC?

  • For individual license holders: 31 August
  • For corporate license holders: 31 October
  • For a corporate license holder that is a disclosing entity: 30 September

ASIC does not grant an extension of time for the lodgement of forms, so you must ensure the timely completion of an AFSL audit and lodgement. We recommend getting in touch with your auditor before the end of the financial year to have adequate time to complete the documents needed for the AFSL audit and lodgement.

How can I lodge with ASIC?

You can submit your annual accounts along with the audit report online via the AFS Licensees Portal. Note that Form FS70 must be lodged together with FS71 and/or FS76. There are no fees when lodging these forms.

For your records, you must keep the completed and signed original forms. Remember that you are legally required to keep relevant documents.

AFSL with Auditors Australia

An AFSL Audit is a specialised area of audit practice. Our expert team with decades of experience at Auditors Australia can help ensure that you remain compliant with your annual lodgement requirements.

We have designed our audits to be efficient, consultative, and collaborative so you won’t have to stress about the process and continue to focus on running your business. Our services also extend throughout the year to ensure you continue to meet your Net Tangible Asset tests and other ongoing obligations.

If you have any questions about the AFSL audit or would like to discuss further how we can assist, click here to get in touch with our team today or call us at 1300 157 712.