“We’re here to audit your accounts.” Is that a sentence that sends a shiver down your spine? It doesn’t need to be!
At Above The Line Accounting, we know that audits can feel overwhelming, but they are an integral part of the film production process.
In this blog, we’re going to walk you through what’s involved in an audit of your accounts so it feels less like you’ve stepped onto the set of Halloween when it’s time to do your next audit.
For independent filmmakers in Australia, there are generally two types of audits to consider:
- a Production Audit, which confirms the production expenditure and is typically requested by investors, and
- the Producer Offset Audit, which confirms the Qualifying Australian Production Expenditure (QAPE) and is a crucial step for obtaining the Offset tax refund for Australian films.
Why do I need an audit?
First, it’s essential to understand that audits are not meant to be scary. They are part of the process to ensure financial accuracy.
- The Production Audit is normally requested by investors, to ensure their investment has been spent where it was intended. If no investor requests a Production Audit, then you do not need to do one.
- If your project is applying for the Producers Offset, then it is a legal requirement to get an external auditor to audit the QAPE Spreadsheets before submitting the application to Screen Australia.
Related Article: What Is The Producer Tax Offset? A Guide For New Producers
At Above The Line Accounting, we work with these audit processes daily, and we assure you that no matter the state of your accounts, they don’t scare us!
What’s the process for a Production Audit or Producer Offset audit?
For either audit, the first thing you need to do is to choose an independent auditor. If you don’t have one, we always recommend the brilliant Roger Wong at Calibre Business Advisory.
If you are using Xero software and have all the invoices attached to the relevant transaction, this will make the audit process relatively painless.
If you are having a Production Audit, then this will occur after the project is completed. At this stage, you should have all your accounts reconciled, and the auditor will select some transactions and ask for the original invoices, details of payments through the bank, and other information. The focus is the Final Cost Report, although they will also look at the Statement Of Investor Funds.
If you are having a Producer Offset Audit, then the document being audited is the QAPE Spreadsheet. The process is the same – the auditor will select some transactions and ask for the original invoices, details of payment through the bank, and other information.
Finalising the audit is usually the final step before submitting your application for the Producer Offset to Screen Australia, and as such, is a crucial step.
That’s it. Done and dusted (like vampires on Halloween).
Related article: How Do I Apply For The Producer Offset?
What can I do to prepare for an audit?
To make an audit easier for everyone, one of the most helpful practices is to keep organised copies of all invoices.
We also recommend:
- Making sure all bank accounts are fully reconciled
- Making sure all your balance sheets are reconciled
- Making sure you pay as many creditors as possible
Conclusion
Ensuring compliance with audits in the Australian film industry doesn’t need to be a daunting process.
We’re happy to help you through every step of the audit process. We’ve prepared over 150 Producer Offset Applications so we can help you complete the application without breaking a sweat.
Reach out to us today, and let’s start preparing for your audit.
A note on this article:
Information provided by the Above Line Accounting on this website is general in nature and does not take into consideration your personal financial situation. It is for educational purposes only and does not constitute formal financial advice.