Audit Requirements and Exemptions in Singapore

For most companies incorporated in Singapore, conducting an annual statutory audit is a legal requirement under the Companies Act.. While essential for regulatory oversight, audits represent a significant annual cost, potentially ranging from S$1,000 to over S$20,000, and require considerable preparation. However, Singaporean regulations do provide audit exemptions for eligible private companies. 

This article will guide you through the mandatory audit requirements and, importantly, explain the specific criteria your company must meet to qualify for an exemption.

Key Regulations for Audits in Singapore

Singapore’s Companies Act is the primary law governing audits. Under the Act, most private limited companies must conduct an annual audit of their financial statements. A qualified public accountant needs to perform this task.

The Act also sets crucial rules for financial reporting, detailing standards for how accounts should be prepared and presented.

To ensure these standards are met, the Accounting and Corporate Regulatory Authority (ACRA) oversees compliance. ACRA mandates that audits adhere to key local and international standards, including:

• Singapore Standards on Auditing (SSAs): Based on international benchmarks (ISAs), these standards outline procedures for rigorous audits. Following SSAs helps ensure financial statements are accurate, reliable, and legally compliant.
• Singapore Financial Reporting Standards (SFRS): SFRS employs accrual accounting, meaning transactions are recognized when they occur, not just upon payment. This approach provides a more accurate picture of a company’s financial position and performance over time.

Statutory Audit Requirements and Procedures for Companies in Singapore

Annual Statutory Audits

In Singapore, annual statutory audits are conducted by licensed professionals who verify that a company’s financial statements accurately reflect its financial position. 

This verification process is vital for promoting transparency and building credibility among stakeholders, including investors and regulators.

To facilitate the audit, your company must prepare comprehensive financial statements and include:

• Income statement
• Balance sheet
• Statement of cash flows
• Statement of changes in equity
• Supporting notes providing context for the auditors

Once audited, these financial statements must be filed with ACRA. This submission is typically part of the company’s Annual Return filing process.

Meeting this requirement ensures regulatory compliance and maintains transparency. For most private companies, the deadline to file the Annual Return falls within seven months after their fiscal year concludes.

 For most companies, the deadline to file the Annual Return is typically 30 days after the Annual General Meeting (AGM), although there are exceptions where the AGM may not be required. However, for private companies, the Annual Return must generally be filed within 7 months after the end of the fiscal year.

Appointment of Auditors

Unless your company qualifies for an exemption under the Companies Act, you generally need to appoint an auditor within three months of company incorporation in Singapore.

Only public accountants or accounting firms recognized and approved by ACRA are eligible for this appointment. The initially appointed auditor holds the position until the company’s first Annual General Meeting (AGM).

At the AGM, the company has the option to either reappoint the current auditor or select a new one for the upcoming year.

The appointed auditor plays a critical role. They ensure the company’s financial statements are accurate and fully comply with the Singapore Financial Reporting Standards (SFRS). By providing an independent opinion, the auditor offers stakeholders valuable assurance that the company’s financial activities are managed and reported correctly.

Auditor Remuneration

The fees for audit services are typically negotiated directly between the company and the chosen audit firm.

This negotiation allows both parties to agree on a structure that accurately reflects the scope, complexity, and resources required for the audit. Factors like your company’s size, the intricacy of its operations, and any additional services needed will influence the final cost.

Keep in mind that fees aren’t always static. They can be affected by significant changes in your business structure, shifts in company size, or new regulatory demands. Furthermore, auditors may charge extra if unexpected issues arise requiring work beyond the original scope.

Regarding transparency, shareholders who represent at least five percent of the total shareholder count or hold at least five percent of the issued shares have the right to request disclosure of auditor remuneration details during a general meeting.

Emerhub helps you connect with the most qualified auditors, saving you the hassle of navigating complex requirements on their own. Our consultants provide ongoing support to ensure audits are seamlessly integrated into broader compliance frameworks, so you can focus on growth and maintain financial transparency.

Audit Exemption Eligibility in Singapore

Singapore’s Companies Act allows certain companies to be exempt from the annual statutory audit.

Your company might qualify if it meets the criteria for a “small company” or is considered “dormant.”

Small Groups and Companies in Singapore

To qualify as a small company or group under the Companies Act, specific conditions must be met.

First, the company (and all subsidiaries in a group) must be a private company throughout the relevant financial year.

Second, the company or group must satisfy at least two of the following three quantitative criteria for the past two consecutive financial years (on a consolidated basis for groups):

• Total annual revenue does not exceed SGD 10 million.
• Total assets do not exceed SGD 10 million.
• The total number of employees does not exceed 50.

Dormant Companies in Singapore

Dormant companies in Singapore are also exempt from statutory audits.

ACRA generally considers a company dormant if it has no accounting transactions during the financial year. IRAS views a company as dormant if it generates no income.

This status allows companies to benefit from reduced compliance requirements.

To qualify for dormancy exemption, your company must meet one of these conditions:

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

Additionally, a dormant non-listed company (which isn’t a subsidiary of a listed company) can be exempt from preparing financial statements. This applies if its total assets are SGD 500,000 or less and it has been dormant since the previous financial year end.

How to Ensure Eligibility for Audit Exemption in Singapore

Gaining an audit exemption significantly reduces compliance costs. This is especially valuable for small and medium-sized enterprises.

The exemption simplifies regulatory burdens. It allows you to allocate resources more effectively toward core business activities.

Here’s how you can work towards ensuring your company qualifies:

• Confirm Company Status: Verify your company is registered as private. If part of a group, ensure the entire group (consolidated) meets the small group criteria.
• Maintain Compliance Records: Even without an audit, you must prepare unaudited financial statements complying with SFRS or IFRS. Always file tax returns on schedule with IRAS.
• Monitor Eligibility Continuously: Regularly review financial performance (revenue, assets) and employee count to ensure you remain within the small company limits. Avoid changes, like becoming a public company, that would disqualify you.

Ensuring your company continuously meets the specific criteria for small company or dormant status requires careful monitoring and accurate record-keeping. At Emerhub, our consultants in Singapore streamline this process for businesses like yours. 

We manage your accounting and tax compliance, actively monitor your eligibility status against the exemption criteria, and prepare accurate financial statements (audited or unaudited) as needed. 

Need help with your corporate tax and accounting? Fill out the form below and get in touch with local experts in Singapore!