Auditor qualifications and audit exemptions

The following exemptions have been authorised for the preparation, reporting and auditing of financial statements for specified incorporated associations.

Auditor independence

A Tier 1 incorporated association’s auditor is exempt from the independence rules in section 52(2) of the Associations Incorporation Act 2009 if:

The audit of the incorporated association is carried out in accordance with the code of conduct relating to independence in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethics Standards Board.

The auditor's report on the incorporated association's financial statements must declare their independence. The declaration should state the following:

• ‘As auditor for the audit of ... (name of incorporated association) for the financial year ended ... (date), I declare that, to the best of my knowledge and belief, there have been no contraventions of the code of conduct relating to independence in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board’.

More information is available in the Class order 10/02 Auditor independence.

Tier 1 incorporated associations exemption from audit

A Tier 1 incorporated association is exempt from the financial reporting requirements of section 43(2) of the Act in relation to application of Australian Accounting Standards where total revenue reported in the income and expenditure statement for a financial year is less than $2 million.

The incorporated association must meet minimum requirements in preparing the financial statements. Class order 11/01 Financial reporting requirements contains these requirements.

Regulatory Guide A1 – Financial Reporting Requirements for a Class of Tier 1 incorporated Associations is available to assist those persons preparing and auditing financial statements for Tier 1 incorporated associations that may qualify for the exemption provided in Class Order 11/01.  

NSW Fair Trading will not exempt a Tier 1 incorporated association from the financial statement requirements of Class Order 11/01.

Making an application for an exemption from audit

A Tier 1 incorporated association may apply for an exemption from the requirements for the audit of its financial statements.

Audit exemption applications will be considered. Criteria include, but are not limited to, the following:

• the nature of the incorporated association and its financial transactions.
• any other requirement for audit, for example, audit provision in constitution or requirement of other legislation or regulatory agency
• level and nature of transactions and accounts. This also considers variance over Tier 1 thresholds
• quality of financial statement preparation. This includes ensuring transactions are recognized and measured according to the Australian Accounting Standards Board. It also checks if the requirements of at least Class Order 11/01 have been met if grant funding was received. The amount, if any, and the audit requirements by the funding agency are also considered
• proportion of assets held as liquid assets
• level of external creditors who may rely on the financial statements
• composition of incorporated association membership.

Applications must be in writing and accompanied by the prescribed fee.

Visit incorporated associations forms and fees for more information.