Dodgy corporates pay little price

Tom Ravlic

ASIC has begun ramping up some aspects of enforcement - and announcing them - so company directors, their advisers and the community understand that there is a price to be paid for non-compliance.

Ten companies were whacked around the ears – prosecuted and convicted, in fact - for a failure to lodge financial statements. Some of those ten failed to lodge for four consecutive years. Six of the 10 were unlisted public companies.

Oddly, the courts’ sanctions on offenders is lame.

Wolf Petroleum Ltd ACN was punished more than the rest - a fine of all of A$12,000 – “for failing to lodge annual financial reports for 2018 and 2019 and failing to hold an annual general meeting or report to its members for that same period.”

Three of the littlies in the ASIC 10 were found guilty without conviction; all three were placed on a bond and required to be of good behaviour.

The fact that action has finally been taking against the recalcitrant corporates is good but the cases in which a company has failed to lodge for multiple years raises a key question: why were those companies able to get away with failure to lodge for that number of years?

It is a question that needs some reflection because there are people that may want to track the accounts of companies that are required to lodge financial statements online.

This may well be a question that people at ASIC reflect on as they continue to review the compliance of entities with financial reporting rules that include when a company must lodge.

It is a clear reminder to entities that failed to lodge that the corporate regulator takes lodgement seriously and it will enforce the law.

ASIC’s critics are also given something to reflect on because over an extended period of time the commission had been seen as a regulator reluctant to bite.

The recent public announcements of the kicks in the shins to companies that failed to lodge reports was critical to ensure ASIC maintains its street credibility on the issue of enforcement.

There was also a case brought by the commission against an audit firm that resulted in the first prosecution for breaches of auditing standards. That case was a reminder to accountants, auditors and their clients that the black letter law provisions, firstly, exist and, secondly, are now in the process of being enforced.

Regulatory action on financial statement lodgement failure gives people who have not taken obligations seriously notice that lodging the required documents is important and the corporate plod will reinforce that obligation with action.

Auditors have also been reminded that understanding their standards is a core part of the work they do on audit engagements. That can only be healthy for the accounting profession and for the business community in the long run.