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Does a small Australian subsidiary of a foreign company need an audit?
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Overview
Even a small Australian office can need a local audit when an overseas company controls it. Check the group structure, what the parent lodged in Australia and whether the company qualifies for reporting relief.
Start with control and the reporting period
The Australian office has six employees and one customer. Head office in Singapore already has an auditor. Does the local company need one too? It might. A proprietary company controlled by a foreign company can have Australian reporting and audit obligations even when the local operation is small.
Record who controlled the Australian company and whether that changed during the financial year. Work through ASIC’s size test using the company and entities it controls. If it is small and foreign controlled, check which reporting pathway applies. A parent’s audited accounts sitting in an overseas filing system won’t, by themselves, answer the Australian question.
One pathway can apply where an eligible parent lodges consolidated financial statements with ASIC covering the subsidiary for the relevant period. Another may be available to a small, foreign-controlled proprietary company outside a large group. That relief has conditions, including a directors’ resolution and lodging Form 384 within the prescribed timeframe.
Decide who needs to do what before year end
Ask head office for the group chart, acquisition dates, the name of the consolidating parent and evidence of any Australian lodgements. Find prior board resolutions and ASIC forms. If local reporting and audit are required, allow time for an independent auditor to plan work, including attendance at a stocktake where relevant.
