Audit Requirements and Exemptions in Singapore

Audit exemptions in Singapore determine whether your company needs to appoint an auditor and have its financial statements audited. Your company may qualify if it is a small company or a dormant company under the Companies Act 1967.  

For most operating private companies, the answer depends on three figures: annual revenue, total assets, and employee headcount. If your company qualifies, you can avoid a statutory audit. However, you still need to prepare and file unaudited financial statements.

This guide explains the audit exemption requirements for companies in Singapore and the steps to take if your company does not qualify.

When is a Singapore Company Exempt From Audit?

To find out whether your company needs a statutory audit, start by checking which audit-exemption route applies to your situation. The Companies Act provides two main routes:

The small-company route under Section 205C of the Companies Act applies to most operating private companies. It focuses on the company’s financial size and workforce.

The dormant-company route under Section 205B applies where the company has no accounting activity. It is intended for a company that has genuinely remained inactive, rather than one with low revenue or limited operations.

If neither exemption applies, your company will need a statutory audit. This often occurs when the company exceeds the size thresholds, becomes a public company, or belongs to a group that fails the small-group test.

Small Company Audit Exemption: The Two-Out-of-Three Test

The small-company exemption is the route most relevant to private limited companies operating in Singapore. It reduces your annual compliance costs and removes the need to appoint an auditor solely for the statutory audit.

However, it is not based on revenue alone. Your company must first meet the private company condition. Then, it must clear the relevant financial thresholds explained below.

Your company must remain private

Section 205C applies only to a company that remains a private company throughout the relevant financial year. This means your company cannot qualify for this exemption simply because it meets the financial thresholds if it becomes public during that period.

Many Singapore subsidiaries established by foreign investors use the private limited company structure, which makes them eligible for this route. However, companies within a group have an additional test to consider. Both the Singapore company and the wider corporate group must respectively qualify as a small company and a small group.

Criteria to qualify as a small company

This is where most companies fall within the exemption. To qualify as a small company, your company must meet at least two of the following three conditions:

• Revenue is the income your company earns from its ordinary business activities.
• Total assets include cash, inventory, receivables, equipment, and property.
• Employee headcount is based on the number of full-time employees at the end of the financial year.

A newly incorporated company applies the test using its current financial year because it has no previous financial results. An established company, however, must meet at least two thresholds in each of the two immediately preceding financial years to qualify as a small company. 

Once it qualifies, it keeps that status until it fails to meet at least two thresholds for two consecutive financial years.

For instance, consider a private company with the following figures:

The company meets the revenue and employee thresholds in both years. It therefore meets two of the three criteria. If it remains private throughout the relevant period and its group also qualifies as a small group, it can generally claim the small-company audit exemption.

Now let’s assume the company grows in financial year 3. Its revenue rises above S$10 million, and its headcount rises above 50. Its total assets also stay above S$10 million, so the company meets none of the three thresholds that year.

This single result does not end its small-company status. Each year's exemption depends on the two preceding financial years, so the company remains exempt in financial year 4. If its financial year 4 figures also fall short, it loses small-company status and needs an audit from financial year 5.

Small-group test for subsidiaries

If your Singapore company belongs to a corporate group, checking its own figures is only the first step. As mentioned earlier, the company must qualify as a small company, while the wider group must also qualify as a small group.

The group uses the same revenue, assets, and employee thresholds. However, it assesses them using consolidated figures for the immediately preceding two consecutive financial years. This includes relevant entities outside Singapore.

For example, a Singapore subsidiary may have S$2 million in revenue, S$1 million in assets, and 10 employees. On its own, it meets every threshold.

However, this changes when its overseas parent and other group entities exceed at least two of the three limits on a consolidated basis. In that case, the group does not qualify as a small group. The Singapore subsidiary will then require a statutory audit.

This is particularly important before a group restructuring, acquisition, or investment round. In such cases, Emerhub can support you with company incorporation in Singapore, ongoing corporate compliance, and coordination with qualified local accounting professionals.

Audit Exemption for Dormant Companies

The dormant-company exemption applies if your Singapore company has not started operating or has paused its business activities. Unlike the small-company exemption, it does not depend on revenue, assets, or employee headcount. 

For instance, you may incorporate a Singapore company to hold a proposed business name or prepare for a later market entry. If the company does not start trading or carry out transactions in the meantime, it qualifies for audit exemption as a dormant company.

Under Section 205B of the Companies Act 1967, your company must meet either of these conditions to qualify for the exemption:

• It has remained dormant since incorporation.
• It has remained dormant since the end of the previous financial year.

Section 205B(3) also disregards certain limited administrative transactions when assessing dormancy. These include:

• Appointing a company secretary or auditor.
• Maintaining a registered office.
• Maintaining statutory registers.
• The taking of shares by a subscriber to the company’s constitution.
• Paying fees, charges, penalties, or interest required under written law.

Ongoing Compliance for Audit-Exempt Companies

An audit exemption saves your company from arranging a statutory audit. However, it does not remove the wider compliance work that comes with maintaining a Singapore company.

Your company should keep accurate records throughout the year, rather than waiting until its filing deadline approaches. This becomes more important as the business grows, takes on investors, or joins a wider corporate group.

As an audit-exempt company, you must continue to:

• Keep complete accounting records that support the company’s transactions and financial position.
• Prepare financial statements unless you qualify for separate financial-reporting relief.
• File your Annual Return with ACRA.
• Meet
• Monitor revenue, total assets, and full-time employee headcount.
• Review consolidated group figures before a restructuring, acquisition, or investment.
• Reassess your eligibility for audit exemption each financial year.

Moreover, directors remain responsible for the company’s financial reporting. This includes ensuring that the company’s financial statements comply with the applicable accounting standards and give a true and fair view of its financial position. 

Filing Deadlines and Requirements

Your key filing deadlines depend on your company’s financial year-end. In most cases, a private company must file its Annual Return within seven months after its financial year-end. Corporate income tax returns are also due by 30 November each year.

When Can a Company Lose Audit Exemption?

It’s important to understand that an audit exemption in Singapore is based on your company’s current circumstances. It is not a permanent approval from ACRA. 

Once an established company qualifies as a small company, it keeps that status until it fails to meet at least two of the three thresholds for two consecutive financial years. This is why one unusual year does not automatically end the exemption.

Your company may lose audit exemption if it:

• Becomes a public company during the financial year.
• No longer meets at least two of the three small-company thresholds over the relevant two-year assessment period.
• Joins a group or goes through a restructuring that affects the small-group assessment.
• Becomes part of a group whose consolidated revenue, total assets, or full-time employee headcount exceeds the relevant limits.
• Resumes business activity after qualifying for the dormant-company exemption.

This makes it crucial to verify your position before the financial year ends. If the exemption no longer applies, you can then allow time to appoint an auditor and prepare the required records. 

Audit Requirements and Procedures If Your Company is Not Exempt

If your company does not meet the requirements for Singapore’s audit exemptions, it must undergo a statutory audit. During the audit, an eligible public accountant or accounting firm reviews your financial statements and supporting records. This provides independent assurance over the accounts and supports your reporting obligations.

Appoint a qualified auditor

Unless your company qualifies for audit exemption, you must appoint an auditor within three months of incorporation under Section 205 of the Companies Act 1967. The auditor must be an ACRA-registered public accountant. You may also appoint an ACRA-approved accounting entity that is authorized to provide public accountancy services.

If your company previously qualified for audit exemption but no longer does, Section 205A(2) requires you to appoint an auditor before your next AGM.

You should never risk leaving this until your Annual Return is due. Your auditor needs time to understand the company's operations, review the accounts, and identify missing records. If you fail to appoint an auditor on time, the company and every director in default may each face a fine of up to S$5,000 under Section 205(17) or Section 205A(3) of the Companies Act 1967.

Records to prepare for the audit

Complete and organized records help you avoid unnecessary delays. Before the audit begins, Emerhub can help you prepare documents that support the numbers in your financial statements, including:

• Financial statements, trial balance, general ledger, and supporting schedules.
• Bank statements and bank reconciliations.
• Customer and supplier invoices, receipts, and payment vouchers.
• Customer and supplier balances, where relevant.
• Payroll records, CPF contribution records, and employee-cost schedules.
• Fixed-asset registers and depreciation schedules.
• Loan agreements, lease agreements, and material commercial contracts.
• Board and shareholder resolutions, plus statutory registers.
• Tax computations and relevant correspondence with IRAS.
• Related-party agreements and records for cross-border transactions.

Get Expert Support for Singapore Audit and Compliance

Emerhub can help you set up a compliance plan that aligns with your company’s structure and growth plans. We can verify if you are eligible for Singapore’s audit exemptions for small companies. Our local team can also support you with company registration, corporate secretarial work, and end-to-end tax support. Where an audit is required, we can connect you with ACRA-licensed Singapore auditors suited to your company’s needs. 

Book a free consultation with our local advisors to discuss your eligibility or overall compliance plan. Fill out the form below, and we’ll put you in touch.