An auditor tests whether your financial statements are materially correct — not whether every transaction is perfect. They sample transactions, verify bank balances, check that revenue and expenses are recorded in the right period, and assess whether your accounting policies comply with Australian Accounting Standards. An audit is not a fraud investigation, but auditors are required to consider fraud risk as part of their assessment.
What it depends on
The full answer depends on your specific circumstances. Here’s what matters.
The type of audit
A financial statement audit (under Australian Auditing Standards) provides "reasonable assurance" that the statements are free from material misstatement. A review engagement provides "limited assurance" — less work, lower cost, lower level of confidence. An SMSF audit combines financial statement and compliance auditing. Each has different scope, cost, and regulatory requirements.
Materiality
Auditors don't check every transaction — they set a "materiality threshold" based on the size of the entity. Errors or omissions below this threshold are considered immaterial (they wouldn't change a reader's decision). For a business with $5 million revenue, materiality might be $50,000–$150,000. This doesn't mean small errors don't matter — it means the audit is designed to catch the big ones.
What triggers a mandatory audit
In Australia, you need an audit if you're a large proprietary company (meeting 2 of 3 thresholds: $50M+ revenue, $25M+ assets, 100+ employees), a public company, a registered charity above the revenue threshold, or an SMSF. Some loan covenants, franchise agreements, and grant conditions also require audited statements.
The auditor's responsibility vs yours
The directors (or trustees, for an SMSF) are responsible for the financial statements being correct. The auditor's job is to form an independent opinion on whether they are materially correct. An unqualified audit opinion means the auditor found no material issues — not that the statements are guaranteed accurate. A qualified opinion means they found something significant.
The last 10%
What a qualified professional can add
The answer above covers the general position. Here’s where professional judgement — applied to YOUR specific situation — makes the difference.
- Identifying weaknesses in your financial controls that could lead to errors, fraud, or regulatory non-compliance
- Providing an independent opinion that gives lenders, investors, regulators, and business partners confidence in your numbers
- For SMSF audits: checking compliance with the Superannuation Industry (Supervision) Act — including in-house asset rules, loan restrictions, and investment strategy requirements
- Detecting patterns or anomalies in your financial data that internal staff may not see because they're too close to the day-to-day operations
Questions to ask before you engage one
If you decide to engage a professional, these questions help you evaluate whether they’re right for your situation.
What is your materiality threshold for this engagement, and how did you determine it?
Will you provide a management letter highlighting control weaknesses — even if the audit opinion is clean?
How many hours do you estimate, and what information do you need from us to keep costs down?
Have you audited businesses in our industry before — and are there industry-specific risks you'll be looking for?
If you find something that concerns you during the audit, how and when will you communicate it to us?
Your next step
If you're not sure whether you need an audit, check the thresholds above — or ask your accountant. If you do need one, start preparing early: clean financial records, reconciled bank statements, and complete supporting documentation will keep audit costs down. Explore our Audit & Assurance domain for more context.
General Advice Warning
The information on this page is general in nature and does not take into account your personal objectives, financial situation or needs. It is provided by Global Mutual Funds Pty Ltd (ABN 20 090 555 436, AFSL 222640) and should not be relied upon as a substitute for professional advice. Consider whether the information is appropriate before acting on it. Read our Financial Services Guide.