Small company audit exemption and business that qualify
Following the ACRA amendments in the Companies Act in 2014, there has been many companies in Singapore that qualify as a “small company” and are now exempted from statutory audit. When you have a company in Singapore, you can enjoy audit exemption if you meet the criteria. If you’re exempted, you enjoy simpler compliance requirements compared to an audited company. With the introduction of the new laws, a small company will be exempted from auditing its accounts if these companies meet the definition of a “small company”.
Is there any benefit to audit exemption? You may ask. The answer is yes, because compliance with the authorities of Singapore becomes slightly easier without an audited accounts. You also save money on the running costs (e.g. there is no need to hire public accounting firm who are auditors) and most importantly, you are able to meet the regulatory requirements faster than if the company was audited.
Singapore companies and small company audit exemption
In Singapore, you can register a business with the Accounting and Corporate Regulatory Authority. This business entity can be sole proprietorship, a partnership, a limited partnership, limited liability partnership and a private limited company.
Now, as a foreigner seeking to set up a business operation in Singapore, it would be much better for you to choose a company. This is because a private limited company is considered a taxable and liable entity on its own, i.e. it is a separate legal entity. That means as one of the shareholders, you cannot be held liable for debts or other financial obligations of the company above what their shares amount to. A private company should not have more than 50 shareholders.
When your company is filing the annual returns with ACRA, you may not be required to file a set of audited financial statement if you are exempted from audit. At the same time, you will still be required to prepare unaudited accounting reports and provide them to the authorities of Singapore upon request.
Should your Singapore Company qualify as a small company, then the business do not need to be audited and hence do not need to file a set of audited accounts in the annual returns with ACRA. You will also not be required to provide audited reports to the shareholders. As such during the annual general meeting (AGM), a set of unaudited financial statements report will be presented to the shareholders instead of an audited report.
Qualifications for audit exemption on “small company”
A company in Singapore qualifies to be a small company that enjoys statutory audit exemptions if it meets 2 out of 3 criteria.
- It has a total revenue that is less than or equal to S$10 million for the financial year under question.
- It has a total asset base that is less than or equal S$10 million for the given financial year.
- The company has a total number of 50 employees or less than that.
Further to that, the place where the company was incorporated is important. To meet the small company audit exemption criteria, this entity must be incorporated in Singapore
Small company audit exemption for group companies
A group company in Singapore is considered as a holding company that is formed of other subsidiaries, which have one source of control. If it qualifies for the small company audit exemption, then it is referred to as “small group.”
Despite it being a group of subsidiaries, it is still exempt from audit if they are small companies as a group. 2 out of 3 conditions must be met.
The consolidated total yearly revenue from all the companies making the group has not exceeded S$10 million, the consolidated total assets have not exceeded S$10 million and/or the total number of employees are not more than 50.
With the new regulation in place, most companies would have been exempted from audit as they meet the “small company” definition. Being exempted from audit means you would need to prepare a set of unaudited financial statements report. Should you require assistance and services of a professional firm (such as J Accounting Pte Ltd), they will be happy to assist you.
