Small business-directors and financial reporting

All directors have a duty to exercise their powers and discharge their duties with due care and diligence under both the general law and the Corporations Act 2001. As a director, you must be in a position to guide and monitor the management of the company. Your responsibilities are not limited by your particular background knowledge and experience.

You must become familiar with your company’s business and how it is run and take reasonable steps to comply with, or ensure compliance with, the legal requirement to keep proper books and records and, in some instances, to meet financial reporting and audit requirements.

If your company is a 'small proprietary company' or a 'small company limited by guarantee' you will generally not have to prepare formal financial reports each year and lodge them with ASIC.

However, all companies must keep written financial records that correctly record and explain the company's transactions, financial position and performance, and allow true and fair financial statements to be prepared and audited.

This obligation exists regardless of whether your company's books and records are maintained in-house or outsourced to a third party, such as an accountant, and whether they are electronic or not.

If your company is required to prepare and lodge financial reports with us, you are entitled to delegate this task to others and seek appropriate professional advice. However, you are still expected to take a diligent and intelligent interest in the information and understand that information.

For instance, even though you may not be an accounting expert, you can still challenge the information and conclusions reached in a financial report prepared on your behalf by seeking explanations, further professional advice and reviewing the cash flows and assumptions used in the preparation of the calculations.

See:

Financial literacy courses

The following organisations may be able to offer financial literacy courses, publications and other resources. Any courses, publications and resources are not approved or endorsed by ASIC, and the contacts are provided for information purposes only.

  • The Australian Institute of Company Directors

  • CPA Australia, and

  • Chartered Accountants Australia and New Zealand (formerly The Institute of Chartered Accountants in Australia).

More information on this topic

Knowing your legal requirements - companies

Knowing your legal requirements - business names

What books and records should my company keep?

Companies that must lodge financial reports with ASIC

Keeping your company details up to date

Changing a company type

Changing a company name

Ensuring your company is solvent

Annual statements and late fees

How to lodge documents and avoid late fees

Waiving a late lodgement fee

Illegal phoenix activity

Your obligation as a company director

Information on ASIC's website

Directors and financial reporting - INFO 183

What books and records should my company keep? - INFO 76

Your company and the law - INFO 79

More about small business

Small business home

Starting a small business

Compliance for small business

Closing a small business

Resources

Protect your business from unfair contract terms

Pen1 

Find out more about the new law applying from 12 November 2016 that aims to protect small businesses from unfair contract terms.

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Last updated: 04/11/2013 12:00