Guide
Does your corporation need an audit?
It depends on two things: your corporation’s registered size, and its consolidated gross operating income for the year. Small corporations with income of more than $100,000 need one. So do all medium and large corporations, whatever their income.
The audit requirement, in both languages
What the Act says
“Your corporation must lodge an audit report each year if it’s a: small corporation with a Consolidated Gross Operating Income (CGOI) of more than $100,000, medium corporation, large corporation.”
“Small corporations with a CGOI of $100,000 or less don’t have to do an audit report.”
What that means
Only one kind of corporation escapes the audit: a small one earning $100,000 or less.
If your corporation is registered as medium or large, income is irrelevant — you need an audit either way. So the first question is not “how much did we earn?” but “what size are we registered as?”
Checked against ORIC — Audit reports, .
The two things that decide it
1. Your registered size
The Registrar records every corporation as small, medium or large. A corporation is a given size if it meets at least two of three criteria — income, assets, and employees. Income alone does not settle it, which surprises boards: a corporation with modest income but substantial assets can be a larger size than its bank balance suggests.
A small corporation meets at least two of: income under $100,000, assets under $100,000, and fewer than five employees. A large corporation meets at least two of: income of $5 million or more, assets of $2.5 million or more, and more than 24 employees. Everything in between is medium.
Checked against ORIC — Corporation size, .
2. Consolidated gross operating income
CGOI is the gross income of your corporation and any entities it controls — not just the corporation on its own, and not profit. Gross.
Grant income counts, and that is where this gets interesting. How unspent grant money is treated in the accounts can change the income figure the thresholds are tested against — which means an accounting decision can change whether your corporation needs an audit at all. If your corporation sits near a threshold, it is worth getting that treatment right rather than discovering it at year end.
Who can sign your audit report
This is widely misunderstood, and the answer is not the same for every corporation.
For large corporations, and any corporation with income of $5 million or more, the audit must be done by a registered company auditor, an audit firm with at least one registered company auditor, or an authorised audit company.
For small corporations with income between $100,000 and $5 million, and medium corporations with income under $5 million, the Registrar allows a wider group. As well as the three above, the audit can be done by:
- a certified practising accountant or a fellow of CPA Australia
- a chartered member or affiliate of the Institute of Chartered Accountants in Australia
- a member or fellow of the Institute of Public Accountants
So a corporation that has been told it must find a registered company auditor may have more options than it thinks — and, in remote areas especially, that can be the difference between finding an auditor and not.
Checked against ORIC — Corporation reporting guide (June 2020), .
Independence: the rule that catches everyone
Whoever audits your corporation must be independent of its management. That requirement sits in subdivision 339-D of the CATSI Act, and it is the reason your own accountant cannot audit accounts they prepared — no qualification changes that.
In practice it means two firms: one that prepares the financial report, and one that audits it. If a single provider offers to do both, that is worth questioning.
There is one more thing boards forget: if you appoint or lose an auditor, ORIC must be told within 14 days.
An audit report is not a compilation report
Corporations sometimes lodge one believing it is the other. A compilation report is a cover letter from an accountant saying the statements were prepared from information management provided. It gives no opinion and no assurance about whether the numbers are right. An audit report does. If your corporation needs an audit, a compilation report will not satisfy it.
What to do next
- Check what size your corporation is registered as — not what you assume it is.
- Work out your CGOI for the year, including grant income and any controlled entities.
- Run both through the reporting checker.
- If an audit is required, appoint an independent auditor early — they need the accounts finished before they can start, and December is busy for everyone.
We prepare financial reports and work alongside your auditor; we do not audit accounts we have prepared. See ORIC reporting.
Frequently asked questions
Does a small corporation need an audit?
Only if its consolidated gross operating income is more than $100,000. A small corporation with income of $100,000 or less does not have to lodge an audit report.
Does grant money count towards the income figure?
Consolidated gross operating income is the gross income of the corporation and any entities it controls, so grant income forms part of it. That matters more than it sounds: how unspent grant money is treated in the accounts can move the reported figure, and the figure is what the thresholds are tested against.
Can our accountant audit our accounts?
Not if they prepared them. Independence is required under subdivision 339-D of the CATSI Act, and an accountant cannot give an independent opinion on their own work. A different firm has to do the audit.
Does the auditor have to be a registered company auditor?
For large corporations, and any corporation with income of $5 million or more, yes — it must be a registered company auditor, an audit firm with one, or an authorised audit company. Below that, the Registrar also allows a CPA, a chartered member or affiliate of CA ANZ, or a member or fellow of the Institute of Public Accountants to audit.
We appointed a new auditor. Do we need to tell ORIC?
Yes, within 14 days of the appointment or resignation.