02 Dec Maximising audit value for international subsidiaries
Which companies need an audit in Australia?
The necessity of an audit for large companies from a regulatory perspective is clear. But how many Asian subsidiaries in Australia are leveraging audit to gain maximum value for their business?
In Australia, all public companies, including most unlisted ones, are required to prepare and lodge audited financial statements with the Australian Securities & Investments Commission (ASIC). Although most proprietary companies are not required to do this, they may need to if they are classified as ‘large’, ie. they satisfy any two of these requirements:
- Annual gross revenue of $25 million or more
- Gross assets of $12.5 million or more
- 50 or more employees (full-time equivalents)
However, besides ensuring compliance with ASIC, a voluntary independent audit of your financial statements may be worth considering. Here are seven benefits your business stands to gain:
- Reliable financial data – For an international organisation to prosper, reliable financial information and sound corporate governance is essential. An audit provides key decision-makers, directors and stakeholders with the confidence that the financial information being used for business decisions is accurate and complies with the relevant accounting framework.
- Internal control improvements Auditors can provide management with recommendations for improving any potential weaknesses in financial controls identified during the audit. If properly implemented by management, these recommendations can lead to a more stronger financial controls with reduced opportunities for fraud or error.
- Productivity gains Auditors may discover findings associated with structural or operational deficiencies and make recommendations on improvements to internal procedures and processes. These recommendations can result in improved efficiency, productivity, additional revenue, and cost reductions.
- Industry insights Your business can benefit from the knowledge of auditors who have significant experience in your industry or with companies facing similar issues. If your auditors work with other Asian subsidiaries, they are often able to provide insights into best practices based on their experience.
- Tax compliance An audit provides assurance that major tax risks are identified and brought to managements’ attention. It should minimise the likelihood of filing inappropriate tax returns that could result in unnecessary tax penalties and interest.
- Transparency Audited financial statements provide transparency to investors, suppliers and financial institutions. Businesses that have not been subject to external audits can be perceived by financiers as having higher default risk and restrict access to credit. If you are selling their business, audited financial statements will assist with the due diligence process.
- Platform for expansion An audit can help international subsidiaries to meet future challenges as they grow and develop into more complex organisations. An independent assessment by qualified professionals of the local entity’s accounting and internal control systems will prevent unforeseen problems, particularly if the business is expanding rapidly or a candidate for listing.
With the right auditor, Asian subsidiaries can leverage an audit to deliver tangible business benefits.
If you would like to find out more about how audit can add value to your business, please contact Steven Zabeti, Accru Felsers Sydney