The auditor’s objective in respect of a concise financial report prepared under the Act, is to express an opinion:

1. whether the concise financial report complies with AASB 1039; and
2. when included, whether the discussion and analysis complies with the requirements of AASB 1039.

The annual financial reporting requirements of a company, registered scheme and disclosing entity are found in section 314(1) of the Act.

Section 314(2) of the Act states:

A concise report for a financial year consists of:

1. a concise financial report for the year drawn up in accordance with accounting standards made for the purpose of this paragraph; and
2. the directors’ report for the year (see sections 298 300A); and
3. a statement by the auditor:
   1. that the financial report has been audited; and
   2. whether, in the auditor’s opinion, the concise financial report complies with the accounting standards made for the purpose of paragraph (a); and
4. a copy of any qualification in, and of any statements included in the emphasis of matter section of, the auditor’s report on the financial report (paragraph 7 of this guidance statement provides clarification regarding the implication of the term “Material Uncertainty Related to Going Concern”); and
5. a statement that the report is a concise report and that the financial report and auditor’s report will be sent to the member free of charge if the member asks for them.

The term “Material Uncertainty Related to Going Concern” has been introduced to the Australian Auditing Standards applicable for financial reporting periods commencing on or after 15 December 2016. The term is not used in the Act and accordingly is not captured under paragraph 6(d) of this guidance statement; however a concise report includes a copy of any statements included in the Material Uncertainty Related to Going Concern section of the auditor’s report on the financial report.

Section 314 of the Act does not require a concise report to include the directors’ declaration made under section 295(4) of the Act in respect of the financial report for the year. Consequently, where the directors of an entity decide to include the directors’ declaration as part of the concise report, the auditor, under ASA 720 The Auditor's Responsibilities Relating to Other Information in Documents Containing an Audited Financial Report, needs to read the declaration, along with other documents comprising the concise report, to identify material inconsistencies with the concise financial report and material misstatements of fact.

Section 314(3) of the Act requires the auditor to report on whether the discussion and analysis, if required by AASB 1039 to be included in the concise financial report^[1], complies with the requirements laid down by the Accounting Standard. Furthermore, section 314(3)(b) specifies that the auditor need not otherwise audit the statements made in the discussion and analysis.

The requirements of the Act relating to concise financial reports are based on the view that a concise financial report can provide members with information relevant to evaluating the business, without giving them fully detailed accounting disclosures. The concise report will, in many cases, be the only report that is sent to members^[2]. The provision, to some members, of less detailed information is expected to be sufficient to meet their needs for an understanding of the financial performance, financial position and financing and investing activities of the company, registered scheme or disclosing entity.

The Australian Accounting Standards Board issued Accounting Standard AASB 1039 Concise Financial Reports, the latest revision of which, dated April 2015, is operative for financial reporting periods beginning on or after 1 January 2009.

Discussion and Analysis

AASB 1039, inter alia, specifies the minimum content of a concise financial report, including a requirement that the financial statements forming part of the concise financial report, other than those of a listed company, be accompanied by discussion and analysis to assist the understanding of members.

AASB 1039 adopts the view that the information reported in the financial statements forming part of the concise financial report will be enhanced by discussion and analysis of the principal factors which affect the financial performance, financial position and financing and investing activities of an entity. According to AASB 1039, the extent of discussion and analysis which is required to be provided in concise financial reports will vary from entity to entity, and from year to year, as is necessary in the circumstances to compensate for the brevity of the concise financial report, compared with the financial report for the year.

AASB 1039 does not require the financial statements, forming part of the concise financial report of listed companies, to be accompanied by discussion and analysis. This is so as to avoid repetition of information required to be included in the directors’ report by section 299A of the Act.

Whilst AASB 1039 does not mandate specific discussion and analysis disclosures, paragraph 27 of the Standard provides examples of the types of disclosures that may, at least, be expected to accompany the financial statements.