50 Matters To Be Considered Before Signing A Company’s Financial Statements, 3rd Edition

50 Matters To Be Considered Before Signing A Company’s Financial Statements

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The Corporations Act 2001 (Cth) requires listed companies, certain public companies and certain proprietary limited companies, to prepare financial reports for in accordance with the Australian Accounting Standards.

Section 295(1) of the Act lists the content of a financial report as including:


  1. The financial statements
  2. The notes to the financial statements
  3. The directors’ declaration

The format and content of the ‘financial statements’ is governed by AASB 101 Presentation of Financial Statements.

The responsibility for the financial statements and the directors’ declaration is that of the board of directors. This responsibility cannot be delegated to others and is made as a resolution of the board.

According to s 295(4) of the Corporations Act 2001 (Cth), the directors’ declaration must state:

  1. Whether, in the directors’ opinion, the financial statements and notes to the accounts are drawn up in compliance with accounting standards;
  2. Whether, in the directors’ opinion, the financial statements and notes to the accounts are drawn up so as to give a true and fair view of the financial position and performance of the company; and
  3. 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.

Although directors are not expected to be experts in financial reporting requirements, directors are expected to be financially literate. To be able to make the above declarations, directors must first satisfy themselves about the accuracy of the financial report. This will require directors to examine and interrogate the financial information of their organisation.

It is a director’s responsibility to ensure:

  • the integrity of the accounting system;
  • appropriate expertise is applied;
  • due process is sound;
  • essential elements of the process are scrutinised and tested by directors;
  • where appropriate, independent expert advice is obtained.

This will lead to a director’s confidence in the integrity of the outputs of the financial and management systems.

50 Matters To Be Considered Before Signing A Company’s Financial Statements, 3rd Edition does not attempt to examine all areas that may be ‘critical’ to every company, but if offers a solid foundation to begin investigating.

Directors should consider each of these questions, where relevant, and if an answer is not considered satisfactory the topic should be pursued.

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