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Corporations Act: AFS Licensees & Reporting Requirements
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AFS Licensees & Reporting Requirements 
as reported in ANT 39/2005 
 
Q: I have a client that holds an Australian Financial Services license and am confused about the reporting requirements. 
 
A: AFS Licensees are required to lodge a profit and loss statement, balance sheet (Form FS70) and audit report (Form FS71) with ASIC annually. 
 
When preparing the financial statements of the entity, the licensee must determine whether the entity is a reporting entity or not. Whilst the current legislation allows for a non-reporting entity to prepare ‘special purpose’ financials, ASIC, as the primary user, is requiring Licensees to lodge ‘general purpose’ financials (i.e. adopting all the Accounting Standards). This arises as ASIC Form FS 70 requires the annual financial statements of AFS licensees to comply with the accounting standards via s989C and Reg. 7.8.13(1). FS 70 allows for the rare circumstances in which an AFS licensee is not a reporting entity, but ASIC's Information Release 00/025, “Reporting requirements for non-reporting entities” states that ASIC believes that licensed securities dealers and futures brokers would only be non-reporting entities in rare and exceptional circumstances such as a securities dealer who is not carrying on business and has no proper authority holders. The auditor needs to review this decision to ensure the reporting entity assessment is reasonable. 
 
The auditor can use an audit program for a services entity (large or small) depending on the size and complexity of the licensee's operations. This program will need to be modified to include work steps related to compliance with the financial requirements of the licence and the licensee's ability to continue to meet its obligations (s990 K(2)) as these matters are included in the audit report. ASIC's Policy Statement 166, “Licensing: Financial  
Requirements” covers financial requirements for licensees, including audit. Paragraph 166.27 onwards lists those matters that ASIC requires assurance on in the audit report. 
 
In October 2004, the AUASB issued AGS 1068, Audit Requirements for Australian Financial Services Licensees under the Corporations Act 2001 to assist members auditing these entities. 
 
Note that the auditor of an AFS Licensee needs to be a Registered Company Auditor.