Audit exemption for small companies in Singapore

4 minute read

Singaporean laws require private limited companies to have their financial statements audited officially (by a licensed auditor or a public accountant).

This audit has to happen at least once a year in Singapore. Additionally, proper records are to be maintained by the company and they shall be available to auditors executing the yearly review and inspection.

However, there was a change in 2014 regarding this law. An amendment was introduced to the Companies Act that modified the criteria for an audit exemption in Singapore. In it, the small company concept was added, whereby small companies are not required to have their statements audited.


What is considered to be a small business?

A Singapore company can qualify for the small company status if it is a private limited company. Listed companies are technically large corporations and automatically subject to the annual statutory audit requirement.

Secondly, a company that meets any 2 out of the 3 audit exemption criteria (listed later in the article) for the immediate preceding two consecutive financial years is considered small. The audit exemption criteria are based on the company’s number of employees, revenue, and assets.

Revenue of a Singapore company is equal to the sales amount generated from its main source of business activity as defined in the Articles of Association. Total assets include properties, cash, and trade receivables that are recorded in accordance with the latest accounting standards.

Audit exemption Singapore criteria

At the moment, a company is exempted from auditing if it is deemed an exempt private company with yearly revenue of S$5 million or less.

However, this approach is going to be replaced by a new small company concept that will determine exemption from statutory audit in Singapore. Essentially, a company does not need to be an exempt private company in order to be exempted from audit.

A business is deemed a small company in Singapore if it meets the following qualifying criteria:

  • It is a private business in the current financial year in question.
  • It meets at least 2 of 3 requirements for immediate past two consecutive years:
  1. Total annual revenue is less than S$10 million.
  2. Total assets are worth less than S$10 million.
  3. The number of employees is under 50.

The following requirements apply to a Singapore company that is part of a group:

  • The company has to qualify as a small company.
  • The entire group has to qualify as a small group company.

The listed requirements have to be fulfilled in order to qualify for the small company audit exemption.

However, keep in mind that at least 2 of the 3 quantitative criteria on a consolidated basis have to be met for a group company to become a small group or holding company for the immediate past two consecutive financial years.

A Singapore company that has successfully become a small company remains a small company for subsequent years until it gets disqualified.

A disqualification occurs if:

  • The company stops being private at any time during the financial year.
  • The company does not meet at least 2 of the 3 quantitative criteria for the immediate past two consecutive financial years.

If a group successfully obtains the small group status, it remains such for subsequent financial years until it fails to meet at least 2 of the 3 qualifying criteria for the immediate past two consecutive years.

Audit requirements for small companies

Many fail to realize what compilation of accounts stands for. A compilation of accounts or reports is a compilation of unaudited Financial Statements of a private company in Singapore.

Profit and loss records, balance sheets, and finance statements are compiled to provide an outlook on the company’s financial standing.

Companies that are exempted from the audit are still required to prepare a full set of unaudited Financial Statements including explanatory notes with the directors’ statement. Additionally, companies need to prepare according to the stipulation laid out by the Singapore Financial Reporting Standards.

The unaudited statements are required for the annual general meetings, tax submission, and accountability to shareholders of the company.

On top of that, these documents can be used to acquire banking facilities, apply for Singapore government grants, and to meet regulatory stipulations in various industries.

Unaudited statements have:

  • Statement of comprehensive income
  • Director’s statement
  • Statement of financial position (balance sheet)
  • Statement of changes in equity
  • Statement of cash flows
  • Notes to the financial documents

Filing of annual return (ACRA)

A Singapore company has to lodge an annual return (AR) with ACRA within 1 month of its AGM. Details of the company officers, registered address, and auditors have to be included in the AR.

Filing of annual tax return with IRAS

A Singapore company has to file its annual tax return with IRAS by November 30. Singapore considers the preceding year as a basis for taxation. The profits for the financial year ending in the preceding year will form the basis for filing the tax return in the current year.

Keep in mind that the directors of the company are responsible and accountable for complying with the annual filing requirements.

Key considerations and obligations for small companies in Singapore

Before the change in regulations happened, the maximum threshold to qualify for audit exemptions stood at S$5 million.

ACRA’s adjustment now allows for at least 25,000 SMEs to qualify for an audit exemption in Singapore.

Notwithstanding these audit exemptions, companies will still have to comply with the following requirements:

  • Prepare unaudited financial statements
  • Maintain proper accounting records
  • Empower shareholders who have at least 5% voting rights to require a company to prepare audited accounts

It is vital that the Singapore company keeps proper accounting records even if it is covered by audit exemption, since ACRA may conduct checks from time to time. Additionally, an external auditor may be appointed to audit the company if it ends up in legal issues.

Therefore, the company’s employees need to have enough knowledge and experience to ensure that the company’s profit and loss accounts as well as balance sheets are prepared properly according to the SFRS.

On top of that, all related documentation (bank statements, invoices, etc.) are to be kept.

If you have doubts regarding voting rights at your company, definitely consult your company secretary. In Singapore, there is a special 5% voting rights class that means that shareholders holding at least 5% of ordinary shares in the company have the right to vote.

Finally, a company can be disqualified if it ceases to be a private company at any time during the financial year and if it fails to meet the criteria for the immediate past two consecutive years.

Wrap up

Singapore is undoubtedly a fantastic business hub both for local and foreign investors and entrepreneurs. The government does its best to make the business environment in the country very favorable.

One of the best things about this is that the government does not plan to change its attractive tax regime. After all, the tax regime in Singapore is quite a benefit and a good enough reason for business people to come to this country.

If you have any uncertainties regarding Singapore corporate tax or the audit exemption for small companies, feel free to contact us.


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