Audit Exemption in Singapore

In Singapore, companies must comply with financial reporting requirements. One key requirement is the need for an annual audit. However, not all businesses need to go through this process. Audit exemption in Singapore allows eligible companies to avoid statutory audits, reducing compliance costs and administrative work.

The Accounting and Corporate Regulatory Authority (ACRA) introduced audit exemption rules to ease the burden on small businesses while ensuring financial transparency. If your company qualifies, you can skip the audit process but must still maintain proper financial records and submit unaudited financial statements.

Small Company Criteria for Audit Exemption

To qualify as a small company, a business must:

• Be a private company throughout the financial year.
• Meet at least two of the following criteria for the past two consecutive financial years:

– Annual revenue of S$10 million or less

– Total assets of S$10 million or less

– No more than 50 employees

If a company meets these conditions, it can benefit from audit exemption, reducing compliance costs and allowing a smoother financial reporting process.

Group Company Audit Exemption Criteria

If a holding company or subsidiary is part of a group, the entire group must qualify as a small group to be exempt from audits. A group qualifies as a small group if, for the past two consecutive years, it meets at least two of the following criteria:

• Consolidated revenue of S$10 million or less
• Consolidated total assets of S$10 million or less
• Total number of employees across the group is 50 or fewer

Each company within the group must qualify individually and collectively. If the group exceeds these limits, an audit is required for financial transparency.

Disqualification Criteria

Even if a company meets the audit exemption criteria, it can still lose its exemption in certain situations. A business will need an audit if:

• It ceases to be a private company during the financial year.
• It fails to meet the small company criteria for two consecutive financial years.
• Shareholders holding at least 5% voting rights request an audit.
• Government authorities require audited financial statements for regulatory purposes.

In such cases, businesses must prepare for a full financial audit, ensuring all financial statements and records comply with Singapore Financial Reporting Standards (SFRS).

Transitional Provisions

Companies incorporated before 1 July 2015 can still qualify for audit exemption in Singapore if they meet the small company criteria in the first or second financial year after the exemption framework was introduced.

For example:

• If a company met the criteria in 2015 and 2016, it qualifies as a small company.
• If a company only met the criteria in 2015, it still qualifies.
• If a company only met the criteria in 2016, it still qualifies.
• If a company fails to meet the criteria in both years, it does not qualify.

These provisions helped businesses transition smoothly into the new audit exemption framework without immediate compliance burdens.

Why Audit Exemption Matters

Audit exemption reduces compliance costs, allowing small businesses to focus on growth. However, even exempted companies must:

• Maintain proper financial records
• Prepare unaudited financial statements
• File annual returns with ACRA

While an audit may not be required, proper accounting ensures financial health and compliance with local regulations.

Key Benefits of Audit Exemption

Audit exemption is designed to help businesses grow by reducing administrative and financial burdens. Companies that qualify can benefit from:

• Lower Compliance Costs – Avoiding audits saves money on audit fees and compliance expenses.
• Less Administrative Work – No need for detailed audit preparation, reducing paperwork.
• Faster Financial Reporting – Unaudited financial statements can be prepared and submitted quickly.

Even though audits are not required, businesses must still:

• Keep proper accounting records
• Prepare accurate financial statements
• File annual returns with ACRA

Failure to maintain proper financial records can lead to penalties and regulatory action. Understanding the audit requirements in Singapore is crucial for businesses to ensure compliance while taking advantage of exemptions.