Appointment and cessation of an Auditor of an Australian Financial Services Licensee
(natural person, partnership, non-corporate trustee or proprietary company)
Difference between auditing a company and a financial services licensee
Appointment of auditor
Resignation
Removal
More information
Sections 990B, 990F and 990G of the Corporations Act 2001 (the Act), relate to the appointment and cessation of auditors for natural persons, partnerships, non-corporate trustees and proprietary companies which hold an Australian Financial Services (AFS) licence. If the financial services licensee is a public company, here is more information.
Difference between auditing a company and a financial services licensee
In general terms, the audit of a financial services licensee involves conducting both a financial and compliance audit to check whether the licensee is complying with its licence conditions and the requirements of the Act.
The audit of a company is primarily a financial audit where the auditor is required to report to members in relation to the company's financial report, and adequacy of financial and statutory record keeping.
While the same auditor can conduct both audits for the one entity, the terms of an auditor's engagement should clearly indicate the type of audit to be conducted.
Appointment of auditor
A financial services licensee must, within 1 month after beginning to hold the licence, appoint as auditor or auditors to audit the licensee's financial statements:
- a person or persons; or
- a firm or firms; or
- a person or persons and firm or firms.
Within 14 days after appointing the auditor, the financial services licensee is required to lodge a written notice (Form FS06 Appointment of an auditor of an Australian financial services licensee) specifying the name of the person or firm appointed and the date of their appointment, together with the lodgement fee of $33. Once appointed, an auditor will generally continue to hold office until they resign or removed by the financial services licensee.
If an applicant for a financial services licence:
- specifies, in the application for the licence, the name of a person or firm that is to be, or has been, appointed to audit the applicant's financial statements; and
- the auditor or auditors specified are appointed before the end of 1 month after the licence takes effect, the applicant is taken to have lodged a notice under the Act.
Resignation
The resignation of an auditor can only take effect after:
- a written application has been made to us by the auditor, requesting our consent to the resignation (Form FS08 Application for consent to resign as an auditor of an Australian financial services licensee). It is recommended that the application be lodged at least three weeks before the date the resignation is to take effect;
- the auditor has notified the financial services licensee that an application has been made; and
- we have granted our consent to the resignation. As we do not have the power to backdate consent, the resignation can only take effect on, or after, the day that consent is granted.
In order for us to give proper consideration to an application, follow these steps:
Step 1
Complete Form FS08, ensuring that it includes:
- specific reason why the auditor wishes to resign;
- details of the status of the audit (i.e. partially completed; not yet started); and
- the date when the resignation is to take effect.
Step 2
Ensure that we have been notified of any contravention of the Act in accordance with s990K.
Step 3
Attach written confirmation from the proposed replacement auditor stating that he or she is prepared to accept the appointment, subject to our consent to the resignation being granted.
Step 4
For a financial services licensee which is a proprietary company, attach a signed copy of a directors' or members' resolution appointing a replacement auditor to the licensee, subject to ASIC's consent to the resignation being granted. |
When an application is made do not assume that we will automatically grant consent. If we do not consent to the resignation, the auditor will continue to hold office as the financial services licensee's auditor.
Once a decision has been made, we will advise both the auditor and the financial services licensee in writing of the outcome of the application.
If the application is successful, the auditor is then required to give written notice of the resignation to the financial services licensee. It is important to be aware that this notice cannot be given to the financial services licensee until after our consent has been received.
In addition to following the procedure to resign as auditor of the financial services licensee, an auditor will also need to resign in accordance with s329 if they were appointed to audit the company's financial report. This applies even if these audits are conducted by the same person/firm.
Under s329, the auditor of a proprietary company can resign by simply giving the company notice of their resignation. The company is then required to lodge a Form 315 Notification of resignation, removal or cessation of auditor within 14 days after receiving the notice of resignation from the auditor.
Removal
Generally the financial services licensee must apply for our consent before it is able to remove the person or firm as its auditor. This application must be lodged by the financial services licensee and should be lodged at least three weeks before the date the removal is to take effect.
While the procedure to be followed is similar to that of a resignation, the financial services licensee is not required under the Act to advise the auditor in writing that the application is being made. However, we expect financial services licensees to do this and will not grant consent to a removal unless the auditor has been put on notice, or reasonable attempts have been made to notify the auditor of the application.
The financial services licensee will need to lodge Form FS07 Application for consent to remove an auditor of an Australian financial services licensee ensuring that it includes:
- a specific reason why the financial services licensee wants to remove the auditor;
- details of the status of the audit (i.e. partially completed; not yet started); and
- written confirmation from the proposed replacement auditor stating that they are prepared to accept the appointment, subject to our consent to the removal being granted.
For a financial services licensee that is a proprietary company, attach a signed copy of a directors' or members' resolution appointing a replacement auditor to the financial services licensee, subject to our consent to the removal being granted. The auditor will also need to be removed in accordance with s329 if the auditor was appointed to audit the company's financial report. Refer to Removal of an auditor under the Corporations Act 2001 for details.
In addition to resignation or removal, it is our view that an auditor appointed under s990B automatically ceases to hold office if they become ineligible to act as the licensee's auditor. In these circumstances our consent is not required. The company is required to lodge a Form FS09 Notification of cessation of an auditor of an Australian financial services licensee as soon as practicable.
Once the position of auditor becomes vacant, a new auditor must be appointed within 14 days. The financial services licensee is then required to lodge a notice of appointment (as previously explained) within 14 days of this appointment.
More information
| This is Information Sheet 6 (INFO 6). Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance. |
ASIC Website: Printed 02/10/2010
