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Which Companies Need To Be Audited In Singapore?

In the business hub of Singapore, each registered organization requires filing financial statements. They must have these statements and accounting records audited each year officially unless they get exempt from the audit. Companies that require complying with the auditing standards should make the use of a public accountant who’s registered with ACRA or Accounting & Corporate Regulatory Authority for audits to get approved accordingly.

Generally speaking, the private limited company happens to be the most suitable business structure in Singapore. A private limited company offers benefits like tax savings, limited liability, and compliance obligations. The Companies Act has introduced the “small company” structure, exempting private limited companies which fulfil a couple of criteria from annual audit requirements. It facilitates the company in reducing the overall compliance costs and regulatory burden.

 

Understanding the Audit Exemption of The Small Companies

Singapore’s attempt to support the vibrant business sphere and nurture the emergence of SMEs or Small and Medium Enterprises has brought something revolutionary. It has introduced a change in the Companies Act ever since 1 July 2015. Since then, the law has allowed small companies to get exempt from getting audited under specific criteria.

Before this change, the exempt companies (private) with yearly revenue below SGD5 million got exempt from getting audited. The audit & assurance for Singapore Companies happens to be more comprehensive of a larger team of company stakeholders. Let’s talk about customers, creditors, and employees as examples. They are interested in the company’s financial statements to reduce the compliance costs for the smaller companies.

How A Singapore Company Proceeds With Registration?

For company registration requirements, the Singapore small company should consider the following:

#1 Shareholding:

The company should have at least one 1 to 50 shareholders, who must be natural persons or even corporate entities. And 100% foreign shareholding is always allowed.

#2 Share Capital:

The paid-up capital at a minimum for setting up the company is around S$1. The company may optimize the share capital at any time by additional capital injection.

#3 Directors.

Both foreign-resident and Singapore-resident persons can become the directors of the Singapore company, but they do not permit corporate directors. The company should have a minimum of one director who is a Singapore resident.

Note: Singapore-resident is someone who is a citizen of Singapore. He should be a permanent resident of Singapore or hold the Employment Pass.

#4 Company Secretary.

The company should appoint a company secretary in a time of six months of the incorporation.

#5 Registered Address.

Every company should have a local registered address where it keeps the statutory documents. The address will not be the PO box.

#6 Company Name.

The company name must get approved before proceeding with the company registration.

Steps for Company Registration

The following are the steps that a small company should follow for registration purposes:

  • Getting the approval of the company name is the foremost criterion
  • The next step is to prepare the company with the registration documents
  • The third-most important parameter is to register with the ACRA

 

Compliance with the Ongoing Statutory Demands

Whether a company has been exempt from the audit requirements or not, the businesses must comply with the ongoing statutory needs. And they are keeping accounting records, being prepared for the shareholders having 5% or more of voting rights for the audited accounts, and filing financial statements.

Consistent spot-checks by ACRA must be conducted on the financial statements of the businesses. If a company gets caught up with legal matters, ACRA will appoint the auditor to audit the company.

Singapore companies must include prompt financial statements and accounting books, regardless of the issues. Employees get equipped with expert knowledge to carry out bookkeeping as well as accounting procedures. Businesses may outsource the tasks to a reliable audit company that takes care of necessary compliances. Besides helping businesses complete auditing standards, the audit firms simplify maintaining the accuracy of the financial statements and records for companies in the future.

Criteria for the Small Companies

If the company comprises the ‘private limited tag, it qualifies as a small Singapore company. But it has to meet a minimum of the following two of these three criteria. Let’s learn the criteria in brief from the given pointers:

  • It is the total assets in a financial year that do not exceed the margin of SGD10 million.
  • The total revenue on an annual basis of around SGD10 million (and not more)
  • The number of employees is not more than 50 in a financial year

There are other considerations after the company meets the criteria mentioned above of getting entitled as a small company. The entire group (of that company) should be considered the ‘small group’ for the company to qualify for the audit exemption. For one group to be entitled as the ‘small group,’ it must meet a minimum of two of the given three criteria for an immediate preceding two years (consecutive). And they include:

  • The overall annual revenue for a group should not be over SGD10 million
  • The consolidated assets in total considering a financial year must not exceed over SGD10 million
  • The consolidated number of the absolute strengths in a financial year should not be over a total of 50 employees

 

Some Points to Remember

In the present situation, the majority of the companies in Singapore need to be audited. But in 2 cases, this rule is not followed:

  • If the company is dormant
  • If the company is an EPC or exempt private company with a yearly turnover of 5 million dollars or less than that

The Bottom Line

Until and unless the business meets these criteria, that small company will get exempt from the audits. However, when the company falls into trouble determining whether it qualifies for the audit exemption due to the complicated issues, the company may consider having a word with the accounting profession. Consultation with a seasoned professional helps determine the eligibility such that the business does not incur penalties unknowingly for failing to comply with statutory requirements.

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