ASIC Form 397 Sets Process for Extending Listed Entity Auditor Tenure Under s324DAC

Key Takeaways

• ASIC's Form 397 is the mechanism for notifying ASIC that directors of a listed company or listed registered scheme have approved an auditor's continuation for up to two successive financial years beyond the five-year limit in s324DA(1).
• The resolution must be lodged within 14 days of its date to be relied upon, and late lodgement means the form is rejected and a new resolution is required.
• Compliance and company secretarial teams should build this timing and the s324DAB content requirements into their auditor rotation calendars.

Deep Dive

ASIC's Form 397 is the mechanism for notifying ASIC that directors of a listed company or listed registered scheme have approved an auditor's continuation for up to two successive financial years beyond the five-year limit in s324DA(1). The resolution must be lodged within 14 days of its date to be relied upon, and late lodgement means the form is rejected and a new resolution is required. Compliance and company secretarial teams should build this timing and the s324DAB content requirements into their auditor rotation calendars.

Form 397 applies to listed companies and listed registered schemes that want to keep the same auditor beyond the five-successive-year limit in s324DA(1). Directors may approve up to two additional successive financial years by resolution. The form is the notification vehicle, and a copy of the signed and dated resolution must be attached as an endorsed annexure. The version reviewed is dated 2 April 2024, so the document appears to be a form and guide rather than a new rule or policy change. Teams should confirm whether any substantive amendments are intended.

Two timing requirements matter. First, the resolution must be passed before the end of the five successive years (the guide says before the end of the fifth successive financial year). Second, it must be lodged with ASIC within 14 days after the resolution date. ASIC will not accept a late form, and directors will be told to pass a new resolution. Because the original approval must still be made before the five-year period ends, a missed lodgement near the end of that period could leave little or no room to remedy it, creating a risk of non-compliant auditor tenure.

On content, the resolution must satisfy s324DAB. If an audit committee exists, the approval must follow its recommendation. The committee must be satisfied that continuing the auditor is consistent with maintaining audit quality and would not create a conflict of interest as defined in s324CD. Without an audit committee, the resolution itself must state the directors' reasons for being satisfied on both points. The form must be signed by a current officeholder (a director or secretary) certifying that the information and annexure are true and complete. Annexures must meet formal requirements: A4 paper, margins of at least 10mm, company name and ACN or ABN, consecutive page numbers, block letters in dark ink, an identifying mark, the prescribed endorsement, and signature and date by the same signatory as the form.

Recommended actions: (1) maintain an auditor tenure tracker that flags the five-year point at least 12 months ahead; (2) schedule audit committee assessments of audit quality and conflicts early enough to inform the board resolution; (3) use a resolution template that documents the s324DAB and s324CD considerations; (4) set an internal lodgement deadline well inside the 14-day window and confirm the current lodgement channel with ASIC, since the form lists a postal address; (5) keep evidence of the committee recommendation and the signed annexure. Note that the form is placed on the public register, so resolution wording should be reviewed for sensitivity.

Risk implications: failure to lodge on time can invalidate reliance on the extension and may leave the entity with an auditor in breach of rotation requirements, with possible consequences for the financial reporting timetable, audit appointment, and director liability. Weak documentation of quality and conflict assessments also exposes the board to regulatory and stakeholder scrutiny of auditor independence.

Source: Australian Securities and Investments Commission