FNSACC624 1

Task 1: Written Questions

1.    Access the ASIC web site to answer the following questions:
a) Which companies are required to have their financial statements
audited?

 
Category of company Mandatory audit requirement

Public company Companies Act No.71 of 2008 (“the Act”) requires audited financial
statements

State owned The Act requires audited financial statements

company

Private company An Audit is required only if it meets the requirements test as per the
Regulations of the Act.

Personal liability An Audit is required only if it meets the requirements test as per the
company Regulations of the Act.

Non-Profit company An Audit is required only if it meets the requirements test as per the
Regulations of the Act.

b) What is the purpose of an audit and an auditor’s report?

A financial audit is conducted to provide an opinion whether "financial
statements" (the information being verified) are stated in accordance with
specified criteria. Normally, the criteria are international accounting standards,
although auditors may conduct audits of financial statements prepared using
the cash basis or some other basis of accounting appropriate for the
organisation. In providing an opinion on whether financial statements are
fairly stated in accordance with accounting standards, the auditor gathers
evidence to determine whether the statements contain material errors or other
misstatements.
Financial reports are the documents and records you put together to track
and review how much money your business is making (or not). The purpose
of financial reporting is to deliver this information to the lenders and
shareowners (the stakeholders) of your business. If someone else is
supporting part of your business, financial reporting must be part of the
essential contract between you and them. Your lenders and investors have
the right to know if their money is being spent wisely and returning a profit.
 
2. Review the Australian Consumer and Competition Commission (ACCC)
web site.  Identify two forms of anti-competitive behaviour that is against the
law. Describe each in your own words. 
 Anti-competitive conduct Section 45 of the Competition and Consumer Act prohibits
contracts, arrangements, understandings or concerted practices that have the
purpose, effect or likely effect of substantially lessening competition in a market, even
if that conduct does not meet the stricter definitions of other anti-competitive conduct
such as cartels. Three shadowy business people 
 Cartels Businesses that make agreements with their competitors to fix prices, rig
bids, share markets or restrict outputs are breaking laws and stealing from
consumers and businesses by inflating prices, reducing choices and damaging the
economy.
 
 
3. Research the Code of Conduct issued by the Australian Institute of
Company directors. Explain four key behaviours expected under the Code and
the importance of adhering to each behaviour.
 The member should act honestly, in good faith and in the best interests of the
company as a whole. 
 The member has a duty to use care and diligence in fulfilling the functions of
office and exercising the powers attached to that office. 
 The member should use the powers of office for a proper purpose, in the best
interests of the company as a whole. 
 The member should recognise that the primary responsibility is to the
company as a whole but may, where appropriate, have regard for the interest
of other stakeholders of the company.
 
  
4. Explain the role of ASX in assisting corporate governance in Australia?
 
 ASX is one of the world’s leading financial market exchanges, offering a full suite of
services, including listings, trading, clearing and settlement, across a comprehensive
range of asset classes.
As the first major financial market open every day, ASX is a world leader in raising
capital, consistently ranking among the top five exchanges globally.
With a total market capitalisation of around $1.5 trillion, ASX is home to some of the
world’s leading resource, finance and technology companies. Our $47 trillion interest
rate derivatives market is the largest in Asia and among the biggest in the world.
ASX’s network and data centre are connected to leading financial hubs. Speed,
reliability, state-of-the-art technology and the diversity of the user community, are
fundamental to the success of the Sydney-based ASX Australian Liquidity Centre.
We operate in a world class regulatory environment, meeting the highest global
standards. Our clearing houses are among the most secure and well capitalised in
the world, and help underpin the stability of Australia’s financial markets.