Item 21 of Annexure 1[2] to the Franchising Code (Annexure 1) imposes mandatory disclosure requirements on the franchisor in relation to financial details, which must be provided to franchisees or prospective franchisees when entering into a new franchise agreement on or after 1 January 2015.


Audit engagements undertaken in relation to the financial details as required under Item 21 of Annexure 1 are performed under ASA 805 Special Considerations-Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement. This standard states that when forming an opinion and reporting on a single financial statement or on a specific element of a financial statement, the auditor shall apply the requirements in ASA 700 Forming an Opinion and Reporting on a Financial Report as necessary in the circumstances of the engagement.


In undertaking audit engagements under Item 21 of Annexure 1, the auditor is required to provide the audit report to the franchisor within four months after the end of the financial year to which the statement of the franchisor’s solvency (directors’ statement) relates.


Refer to Appendix 1 which sets out the Financial details under Item 1 of Annexure 1 to the Franchising Code, to be included in the franchisor’s disclosure document prepared for a franchisee or prospective franchisee looking to enter into a franchise agreement from 1 January 2015.