LAW 2505 Lecture Notes - Lecture 4: Financial Statement, Cash Flow, Reasonable Person
23 May 2018
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FINANCIAL REPORTING AND AUDITORS
Issue: creditor/ receiver taking over company, needs records; member/ shareholder wants access to
opas reords (public disclosure); company asking if their records are valid;
FINANCIAL RECORDS
Step 1: part 2.M of the CA regulates the opas keepig of fiaial reords. Pursuat to s 286,
every company must keep written financial records that
a. correctly record and explain transactions and financial position and performance
b. Would enable true and fair financial statements to be prepared and audited
Step 2: Financial records must be systematic and include
• s 9 invoices, receipts, orders for payment of money/ bills/ cheques/ vouchers; docos of
prime entity; working papers and other docos are needed to explain methods by which FSs
are made up and adjustments to be made in preparing FSs
step 3: Records must be retained for 7 years; Can be kept electronic but must be able to be made
available in hard copy
Step 4: Access to documents
• Directors (right of access while directors; for proper purposes; interest of company, not
personal gain) s 290
• Other rights 'signposted' in s 291
o Members by application to court s 247A
o Auditors s 310
o ASIC powers to inspect ss28-39 ASIC Act
Step 4: these records are used to produce reports, which are outlined In part 2.M3
1. Financial report + director’s declaration s 295(1)
a. Each financial year
b. Required by
i. all public companies, large pty companies, all disclosing entities/ registered
schemes; s 292
ii. some small pty companies at shareholder's (with 5% of votes) direction (s
293) or ASIC direction (s 294);
iii. any company to advise ASIC when insolvent through extract of
particulars 346A-C
c. Elements
i. Financial statements incl balance sheet listing assets, liabilities and capital
(reserved, retained profits, share capital)
ii. Profit and loss account
iii. Statement of cash flow (in and out)
iv. Statement of changes in equity
v. Disclosures and notes
d. Must comply with accounting standards s 296
e. Must give a true and fair view of the company's financial situation s 297
2. Director's declaration that s 295(4)
a. whether, in the directors' opinion, there are reasonable grounds to believe that the
company will be able to pay its debts as and when they become due and payable;
and
b. that the company has included with their FR and notes an explicit and unreserved
statement that they are in compliance with international financial reports
standards
c. that the financial statement and notes are in accordance with this Act, including
i. s 296 (compliance with accounting standards); s 297 (true and fair view);
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Document Summary
Issue: creditor/ receiver taking over company, needs records; member/ shareholder wants access to (cid:272)o(cid:373)pa(cid:374)(cid:455)(cid:859)s re(cid:272)ords (public disclosure); company asking if their records are valid; Step 1: part 2. m of the ca regulates the (cid:272)o(cid:373)pa(cid:374)(cid:455)(cid:859)s keepi(cid:374)g of fi(cid:374)a(cid:374)(cid:272)ial re(cid:272)ords. Pursua(cid:374)t to s 286, every company must keep written financial records that: correctly record and explain transactions and financial position and performance, would enable true and fair financial statements to be prepared and audited. Provide financial report, director"s report and auditor"s report to members. Lodge the financial report, directors" report and auditors" report with asic. Public companies- law financial report, director"s report and auditor"s report before agm. All companies: confirm or correct asics extract of particulars in a return of particulars (compliance notice) ss 346a-c. Aware= d/ executive knows or should know: any information concerning it that a reasonable person would expect to have a. Positive info (communicated to them) or negative info (absence)
