In Singapore, every registered company is required to file financial statements and have their statements and accounting records officially audited every year, unless they are exempt from audit. Companies who need to comply with auditing standards must use a public accountant registered with the Accounting and Corporate Regulatory Authority (ACRA) in order for the audits to be approved.
Small company audit exemption
Singapore’s push to support its vibrant business landscape and nurture the growth of more Small and Medium Enterprises (SMEs) brought a change in the Companies Act on 1 July 2015, allowing small companies to be exempt from being audited under a certain criterion. Before the change took place, only exempt private companies with yearly revenue of less than SGD5 million were exempt from being audited.
The small company audit exemption is more inclusive of a wider group of company stakeholders, for example, customers, employees and creditors, who are interested in the company’s financial statements and, best of all, reduces compliance costs for these smaller companies.
Small company criteria
If a company is a private company in that financial year, it qualifies as a small company if it meets at least two of the following three criteria for the immediate past two consecutive years, including:
- A total annual revenue of not more than SGD10 million.
- It’s total assets in the financial year do not exceed SGD10 million.
- The total number of employees in the financial year is not more than 50.
If a company meets the criteria of being a small company, but is part of a group, the entire group must be considered a ‘small group’ in order for the company to qualify for audit exemption. For a group to be considered a ‘small group’, it has to meet at least two of the following three criteria for the immediate preceding two consecutive years, including:
- The total annual revenue for the group is not more than SGD10 million.
- The consolidated total assets in the financial year do not exceed SGD10 million.
- The consolidated total number of employees in the financial year is not more than 50.
As long as a business meets the criteria, the small company will be exempt from audits. If a company has trouble determining whether or not it qualifies for audit exemption because of complicated issues, the company can consider consulting an accounting professional to help it determine its eligibility, so that businesses do not unknowingly incur penalties for not complying with the statutory requirements.
Compliance with ongoing statutory requirements
Whether or not a company is exempt from audit requirements, businesses still must comply with other ongoing statutory requirements like filing financial statements, keeping accounting records, and be prepared for shareholders who hold 5% or more of voting rights to request for audited accounts. Regular spot-checks by the ACRA will still be conducted on the businesses’ financial statements, and in the event that a company is caught up with any legal issues, the ACRA will also appoint an auditor to audit the company.
In any case, companies should be prepared with accurate financial statements and accounting books. Either employees are equipped with the knowledge to carry out the accounting and bookkeeping procedures, or businesses can outsource these tasks to a reliable audit firm who can take care of the necessary compliance. Apart from helping businesses to comply with auditing standards, audit firms make it easier for companies to maintain accurate financial records and statements in the long run.
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