Everything You Wanted to Know About Audit Requirement in Singapore - Updated 2024
Operating a private company in Singapore is not without its requirements. A critical requirement for those who want to incorporate in Singapore is being audited.
Unless you are exempted…..
In this article, we'll talk about the different Singapore audit requirements for private companies, how to qualify for audit exemption in Singapore, and much more.
What is a Statutory Audit in Singapore, and Why is it Required?
Under the Singapore Company Act, private limited companies in Singapore must have an annual Statutory Audit. This is a checkup of their financial statements by a licensed auditor or public accountant.
Statutory audits are necessary because they can give an unbiased view of your Singapore company's financial statements to ensure that they fairly and accurately represent its financial position. This can raise stakeholders' confidence in the financial reporting and make sound investment decisions.
Who Needs to be Audited in Singapore?
A private company in Singapore must be audited unless they are small companies, small groups, or dormant companies.
However, suppose a company breaks any laws or regulations related to laying the financial statements during AGM or keeping accounting records. In that case, ACRA may choose to audit the companies even if they are exempt from audits.
I know you may have a lot of questions here after reading this. You may wonder
How do you define a small company in the audit exemption?
What does a small group mean?
How do you determine exemption for companies incorporated in Singapore?
Don't worry; we will explain the Singapore audit exemption requirements and all those definitions in more detail later in this article. Now, let's look at the audit requirements for private companies first.
Singapore Audit Requirements for a Private Company
There are three main audit requirements for a private company that ACRA sets out.
Appointment of auditors
Role of auditors
Auditor remuneration
Appointment of Auditors
All private companies in Singapore must appoint at least one auditor within three months from the date of incorporation. The auditor must be a public accountant or an accounting firm registered with the Accounting and Corporate Regulatory Authority (ACRA).
The auditor will stay in this position until the first annual general meeting of the shareholders. The company can either keep the same auditor or choose someone new at that time.
Role of Auditors
As part of the audit process, companies in Singapore are required to prepare an Audited Financial Statement. The company's financial statements will contain the balance sheet, income statement, cash flow statement, and more.
The role of auditors is to:
Express an opinion on whether the audited financial statements give an accurate and fair view of the company's financial position and report any material discrepancies they may find.
Check if the financial statements comply with local and international financial reporting standards.
To do all this, auditors must have access to company records to properly and timely audit the company's finances.
Auditor Remuneration
Auditors must be paid for their services by the provisions of the Companies Act. However, there is no specific law on how much audit firms should charge their clients. This means the fee is open for negotiation between the client and the audit firm.
However, companies must disclose their auditor's remuneration in a general meeting if shareholders request it.
What if a company auditor resigns or is removed?
The company will need to appoint a new auditor if the old one is removed or resigns.
If the company directors fail to appoint an auditor, the Accounting and Corporate Regulatory Authority of Singapore (ACRA) may appoint an auditor for them.
Under the Companies Act, there are different procedures for appointing a new auditor when the previous one is removed or resigns.
If the previous auditor was removed, then:
The company must inform the auditor that they will be removed.
The company meets and appoints a new auditor through a decision made and approved by at least three-fourths of the general meeting's attendees.
The company will notify the Registrar about the auditor's removal.
If the previous auditor resigns:
The company meets within three months after receiving the auditor's resignation notice.
The company appoints a new auditor and notifies the Registrar within 14 days after the appointment has been approved in the General Meeting.
All the companies that fail to comply with the above regulations will be fined S$5,000.
What Are Some Changes Regarding Audit Procedures and Requirements This 2024?
Several changes are expected to occur in Singapore regarding audit procedures and requirements in 2024. Here are some of the key points:
Mandatory Audit for SRPS: Starting from 1 March 2024, all Ship Repairers' Protection & Indemnity (SRPS) operating in Singapore will be subject to a mandatory audit by the Recognised Organisations (ROs).
Taxation of Foreign-Sourced Income: Effective from 1 January 2024, Singapore will begin taxing foreign-sourced disposable gains. This follows the approval of amendments to the country's tax laws.
New GST Rate: Purchases of goods and services from Goods and Services Tax (GST)-registered businesses on or after 1 January 2024 will be subject to a new GST rate.
Transfer Pricing Audit Wave: Financial years closing on 31 December 2021 and 31 December 2022 would be within the scope of the 2024 Transfer Pricing (TP) audit wave.
IFRS Disclosures on Supplier Finance: The International Accounting Standards Board (IASB) has decided to fast-track the mandatory application of new disclosure requirements for supplier finance arrangements to 2024.
Property Tax Increase: Property taxes for most residential properties will increase in 2024 due to higher market rents and Annual Values (AVs).
Remember that these changes are based on the information available as of today's date, 1/4/2024, and may be subject to further amendments or revisions.
Audit Regulation in Singapore
Audit regulation in Singapore is overseen by several regulatory bodies to ensure the integrity and reliability of financial statements. The primary regulatory authority is the Accounting and Corporate Regulatory Authority (ACRA), which sets the standards and regulations for audits conducted in Singapore.
ACRA works in collaboration with the Singapore Accountancy Commission (SAC) and the Institute of Singapore Chartered Accountants (ISCA) to establish and enforce auditing standards. These regulations aim to uphold audit quality, independence, and ethical conduct, fostering confidence in the financial reporting process.
Auditors in Singapore must adhere to these regulations and undergo regular inspections and quality assurance reviews to maintain high professional standards.
Singapore Standards on Auditing
Singapore Standards on Auditing (SSAs) are vital guidelines established by the Accounting Standards Council (ASC) and the Institute of Singapore Chartered Accountants (ISCA). These standards provide auditors with a comprehensive framework to conduct high-quality audits, ensuring consistency, reliability, and transparency in the auditing process.
The SSAs cover various aspects, including risk assessment, audit planning, evidence gathering, materiality, and reporting requirements. They align closely with international auditing standards, reinforcing Singapore's reputation as a reliable financial hub and facilitating cross-border investments.
Adherence to the SSAs is enforced through regular quality control reviews and inspections, fostering continuous improvement and maintaining the integrity of financial reporting.
The Singapore Standards on Auditing are a cornerstone of the auditing profession, offering auditors clear instructions and best practices for effective and rigorous audits.
By following these standards, auditors contribute to a robust auditing environment that safeguards stakeholders' interests and fosters confidence in Singapore's business community. The SSAs demonstrate Singapore's commitment to upholding high auditing standards and provide a solid foundation for auditors to conduct audits with due professional care, ensuring the credibility and reliability of financial statements.
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Which companies are Exempt from Audit in Singapore?
As we mentioned earlier, some companies may be exempt from statutory audits in Singapore. These companies are typically classified as small companies, small groups, or dormant companies. Read about the Singapore audit exemption criteria below:
Audit Exemption Singapore - Criteria for Small Companies
To qualify for the small company audit exemption in Singapore, your company must be a private company within the current financial year and meet at least two of the following three audit requirements for the past two consecutive years.
The company has a total annual revenue of less than or equal to S$10 million.
The company also has a total asset worth less than or equal to S$10 million.
The company employs less than or equal to 50 individuals.
Audit Exemption Singapore - Criteria for Small Groups
If a company is part of a group company, the following requirements are needed to qualify for audit exemption:
The company in question must meet the criteria to be eligible as a small company - refer to the conditions above.
The entire group that the company in question belongs to has to qualify as a small group company.
In other words, if a company is part of a group company, you can only be exempt from audit if you are a small company that is part of a small group.
What are the requirements to qualify as a small group company? For a group company to be eligible as a small group, at least two of the following three requirements must be met for the past two consecutive years:
The consolidated revenue of the entire group must not exceed S$10 million.
The total assets of the whole group must not exceed S$10 million.
The total number of employees in the whole group must not exceed 50.
Singapore companies classified as small companies retain their status for the subsequent financial years until they are disqualified.
Small companies are disqualified if:
The company in question stops being private any time during the financial year
The company in question does not meet two of the three qualifying criteria for the past two consecutive financial years.
Audit Exemption Singapore - Criteria for Dormant Company
There are two ways for a dormant company to be exempt from audit requirements if it can prove that:
It has not been active since it was created; or
It has not been active since the end of the previous financial year.
What are the Singapore statutory audit requirements, even if a company qualifies for audit exemption?
Even if a small company is exempt from audit, it will still need to follow these requirements:
Preparation of unaudited financial statements (UFS)
Maintaining proper accounting records
Holding AGM
Lodging Annual Return
The unaudited financial statements are required for tax submission, annual general meetings (AGM), and company shareholders' accountability. These documents will also be used to apply for bank accounts, Singapore government grants and meet government regulations for different industries.
Unaudited financial 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
It is important for a company incorporated in Singapore to always keep good accounting records. This is because ACRA regularly checks companies to ensure everything is in order. External auditors may also be appointed if a company deals with legal issues.
Disqualification Criteria for Audit Exemption in Singapore
Understanding the disqualification criteria is crucial for companies that currently enjoy audit exemption status under Singapore's regulations. A company can lose its audit exemption status under the following conditions:
Change in Company Structure: If a company ceases to be a private company at any point during the financial year, it risks losing its audit exemption status. The change could occur due to restructuring or altering the company's nature, affecting its eligibility for audit exemption.
Failure to Meet Small Company Criteria: The exemption hinges on meeting two of the three quantitative criteria for two consecutive financial years. These include having annual revenue of not more than S$10 million, total assets of not more than S$10 million, and no more than 50 employees. Failing to meet at least two of these criteria for two consecutive years disqualifies a company from the exemption.
Group Company Status: For a company that is part of a group, both the individual company and the entire group must qualify as a "small group" to maintain exemption status. A "small group" must meet at least two of the three quantitative criteria on a consolidated basis for the immediate past two consecutive financial years. Failure to meet these criteria disqualifies the group and its member companies from the exemption.
It's important for companies to regularly review their status against these criteria to ensure continued compliance with Singapore's audit requirements.
The Wrap Up
Singapore is, without a doubt, one of the best countries to do business with. Not only is it easy for local and foreign business owners to incorporate their companies in Singapore, but the government enforces unparalleled transparency and accountability.
Here at Piloto Asia, we’ll be more than happy to assist you with the auditing process for your company.
One of our dedicated account managers will respond to your messages in as little as 24 hours…
Frequently Asked Questions
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All companies registered in Singapore are required to appoint an auditor within 3 months of its incorporation unless exempted from an audit.
The audit exemptions apply for companies that fall under the "Small Company" or "Small Group" category, which must meet specific criteria related to annual revenue, total assets, and the number of employees.
If a company does not qualify for audit exemption, it must conduct a statutory audit of its financial statements annually. The directors of a company are required to appoint at least one public accountant or accounting firm approved by ACRA to be the company's auditor.
The role of auditors includes ensuring compliance with financial reporting standards and providing a true and fair view of the company’s financial position.
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Unaudited financial statements are financial reports that have not been examined or verified by an independent auditor and the Accounting and Corporate Regulatory Authority (ACRA) in Singapore.
Unlike audited financial statements, which undergo a rigorous review process, unaudited financial statements are typically prepared by the company's management for internal purposes or shared with stakeholders such as investors, lenders, or creditors.
Common components of these statements include the balance sheet, income statement, cash flow statement, and other financial reports. In Singapore, even small companies and dormant companies that are exempt from statutory audit are required to prepare and file unaudited annual financial statements, following specific qualifications and regulations.
While unaudited financial statements offer insights into a company's financial performance and position, they are not subject to the same level of scrutiny as audited ones.
As a result, stakeholders should exercise caution when relying on them, as they may contain errors or inaccuracies that have not been detected through an external audit.
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Yes, anyone can prepare unaudited financial statements. However, it is important to note that unaudited financial statements are not subject to external verification, and therefore may not be as reliable as audited financial statements.
It is recommended that anyone preparing unaudited financial statements have a good understanding of accounting principles and financial reporting requirements.
In some cases, companies may choose to engage the services of an outside professional to prepare their financial statements in accordance with an appropriate accounting framework
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In Singapore, the main difference between audited and unaudited financial statements lies in verification and purpose.
Audited financial statements are reviewed by a certified external auditor and must be filed with ACRA by most companies, ensuring accuracy and compliance with Financial Reporting Standards (FRS).
Unaudited financial statements, often used by small and dormant companies, are not subjected to independent verification by ACRA or an external auditor.
While audited statements provide higher assurance to stakeholders, unaudited statements are typically used for internal purposes or regulatory filings with ACRA and IRAS, and may contain errors or inaccuracies.
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To obtain financial statements of a company in Singapore, you can typically request them directly from the company itself. Publicly listed companies are also required to make their financial statements available to the public through the Singapore Exchange (SGX) or other regulatory bodies such as ACRA (Accounting and Corporate Regulatory Authority). For private companies, obtaining financial statements may require permission from the company itself or relevant authorities.
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Preparing financial statements in Singapore requires adherence to the Singapore Financial Reporting Standards (SFRS) or Singapore Financial Reporting Standards for Small Entities (SFRS for SE). The process involves gathering financial data, aligning with applicable standards, and ensuring accurate reporting. It is recommended to engage professional accountants or accounting firms with expertise in Singapore's accounting requirements to ensure accurate and compliant financial reporting.
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In Singapore, companies are generally required to keep their accounting documents, including financial statements, for a period of at least 5 years from the end of the financial year to which they relate. This requirement ensures that financial records are maintained for proper record-keeping, auditing, and compliance purposes.
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Singapore follows the Singapore Financial Reporting Standards (SFRS), which are formulated by the Accounting Standards Council (ASC). The SFRS is closely aligned with the International Financial Reporting Standards (IFRS), ensuring a high degree of conformity with the international accounting norms. This alignment facilitates the comprehension and comparison of financial statements across international boundaries, which is beneficial for investors, businesses, and other stakeholders.
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When selecting an accounting company in Singapore, it's essential to ensure they are well-versed with the local audit regulations. Some private limited companies in Singapore may be exempt from audit, depending on their size and revenue.
However, those who are required to have an audit should choose an accounting firm that is registered with the Accounting and Corporate Regulatory Authority (ACRA) and is familiar with the Singapore Standards on Auditing (SSAs). The firm should also be capable of guiding you through the audit process, from the appointment of auditors to the preparation of Audited Financial Statements.
Piloto Asia offers comprehensive guidance and services to help businesses navigate the auditing process seamlessly, whether they are required to have an audit or not.
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At the end of each financial year, companies in Singapore are required to conduct an audit, as stated by the Singaporean Companies Act. Exceptionally, small companies and dormant entities are exempt from this procedure. To qualify as a 'small company', a firm must fulfill at least two of three criteria within the immediate two preceding financial years: Total annual revenue below S$10 million, total assets under S$10 million or fewer than 50 employees
With regards to why you might want to set up a holding company, this could serve as a beneficial strategy depending on your circumstances, such as for the purpose of risk management and consolidating control over subsidiary entities. It is crucial to note that the audit requirement applies to these entities as well. Consulting a professional to understand the specific obligations of your business structure in Singapore is always recommended.
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No, not all Singapore companies need to be audited. The Singapore Companies Act and the Inland Revenue Authority of Singapore (IRAS) determine the audit requirements for Singapore companies. Private companies in Singapore must appoint an auditor if their annual turnover exceeds S$10 million. The Singapore Corporate Tax Guide provides more detailed information on the audit requirements for Singapore companies. The guide can be found on the IRAS website.
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You must still file an ECI in Singapore for your company, even if you are closing it down. The ECI filing deadline is June 30 of the following year, after the basis period. For example, if your company's basis period is from January 1, 2023, to December 31, 2023, the ECI filing deadline is June 30, 2024.
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In Singapore, companies including investment holding companies are generally required to conduct an annual statutory audit, as per the Singapore Companies Act. However, small companies and dormant entities are exempt if they meet specific criteria, such as having annual revenue below S$10 million, total assets under S$10 million, or fewer than 50 employees. This exemption also applies to holding companies, but given their unique financial structures, it's advisable to seek professional advice to ensure compliance with the audit requirements.
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As Singapore's #1 corporate service provider and business information resource, Piloto Asia emphasizes that all companies incorporated in Singapore must comply with the financial reporting standards of Singapore (FRS).
These standards, which align with the International Financial Reporting Standards (IFRS), are prepared and issued by the Accounting Standards Council (ASC). Compliance with the FRS is essential to ensure that your company’s financial statements are transparent, consistent, comparable, and credible across international borders.
For any inquiries or need for comprehensive guidance and support on navigating these standards, our team at Piloto Asia is always ready to assist.