The preparation, presentation and content of financial reports are ultimately the responsibility of the directors of a co-operative.
A large co-operative must have annual financial reports audited by a registered company auditor and obtain the auditor’s report. A small co-operative that was directed by members or the Registrar to prepare a financial report does not need the report audited if it was not a requirement of the direction.
It is a good idea to talk to people involved in other organisations for recommendations of a competent auditor, and search the auditors’ register at www.asic.gov.au for details of registered auditors.
To review or audit?
An auditor’s report provides an opinion as to whether the applicable financial reporting framework has been applied in the preparation of the report, whether it is free from material misstatement and whether it shows a true and fair view of the operating results, financial position and cash flows of the entity. An auditor uses procedures in an audit to detect material misstatements and to reduce the risk of fraud.
The members of a small co-operative may require the financial reports to be reviewed rather than audited. A review is cheaper than an audit, and less detailed. The co-operative receives limited assurance that there are no material changes that need to be made to an entity’s financial statements for them to conform with the applicable financial reporting framework, and the reviewer does not require an understanding of internal control, does not assess fraud risk and does not give an opinion as to whether the financial report gives a true and fair view, or is presented fairly, in all material respects.
Audits and reviews must meet the standards set by the Australian Auditing and Assurance Standards Board.
Auditors at meetings
Co-operatives that require an auditor must give the auditor notice of general meetings and any communications related to the meeting. The auditor or their representative is entitled to attend and be heard on any business of the meeting that concerns the auditor. If an auditor or their representative attends the AGM, the members must be allowed a reasonable opportunity to ask questions of the auditor.
Appointment and office
Members of a small co-operative may appoint an auditor at a general meeting or the directors may appoint one.
Similarly, members of a large co-operative may appoint an auditor at a general meeting or the directors may appoint one. The auditor must be appointed within one month from the day the large co-operative was registered.
Unless the previous auditor was removed from office at the AGM, an auditor is nominated to be appointed by a member giving the co-operative written notice of the nomination before the meeting is convened, or not less than 21 days before the meeting. A copy of the notice of nomination is sent to the nominated auditor, the current auditor and anyone entitled to receive notice of the general meetings.
The auditor must provide consent to be the auditor before being appointed. The Registrar must be notified of the auditor’s appointment within 28 days.
The Registrar may appoint an auditor if an auditor is removed but not replaced, the co-operative does not appoint an auditor when required by law to do so, or a member of the co-operative applies to the Registrar in writing for the appointment of an auditor.
For a large co-operative, an auditor appointed by a vote of the members is appointed “for life”, whereas an auditor appointed by the board holds office only until the co-operative’s next AGM. Any vacancy in the office of auditor of a large co-operative is to be filled at an AGM by an ordinary resolution. Appointments for life means until the auditor dies or becomes insolvent, is removed or resigns from office, ceases to be an auditor or ceases to be capable of acting as auditor due to a conflict of interest.
An auditor appointed to a small co-operative retires at the end of the AGM at which they report with the Act not requiring the position of auditor to be refilled, unless the members so direct.
The reasonable fees and expenses of an auditor are payable by the co-operative.
Removal and resignation
An auditor of a large co-operative can be removed from office by resolution at a general meeting, with notice of intention to move the resolution given to the co-operative at least two months before the meeting is held, unless a meeting is called after the notice of intention is given. The notice must be sent as soon as possible to the auditor and lodged with the Registrar.
Within seven days the auditor may write to the co-operative and request that the auditor’s representations be sent to every member before the meeting and read out at the meeting.
An auditor of a large co-operative may resign if the auditor has the consent of the Registrar to resign. The Registrar’s consent is not required for the resignation of an auditor of a small co-operative.
Within 14 days of removal or notice of resignation, the co-operative must lodge the removal or the notice with the Registrar.
An auditor ceases to hold office if a co-operative is wound up.