Auditing your company’s finances is essential for validating the fairness and accuracy of a business’s financial statements. Singapore’s audit regulations mandate that every registered company must submit financial statements each year. Unless exempted from audit, businesses must have their statements and accounting records adequately audited.
The Singapore Companies Act (CA) specifies guidelines for several areas of company audits, including the appointment of auditors and the types of businesses that are exempt from audit obligations. This article will walk you through the audit regulations in Singapore that every business owner must be aware of.
What Is a Statutory Audit?
A statutory audit is an external audit performed annually to fulfil a specific set of legal requirements, including financial reporting standards. Based on audit regulations in Singapore, statutory audits ensure that your company’s financial statements accurately and fairly reflect its financial standing. Auditors provide an unbiased perspective on the financial statements, enhancing stakeholders’ trust in your financial reporting and aiding in sound investment decisions.
Singaporean Private limited companies must conduct an annual statutory audit under the Companies Act, performed by a certified auditor or public accountant. The Accounting and Corporate Regulatory Authority (ACRA) is the main regulatory body for audit regulations in Singapore.
What Is Needed to Conduct a Statutory Audit?
Specific pieces of information are examined during a statutory audit of a Singapore company. These details include:
- Comprehensive Income Statement
- Cash Flow Statement
- Statement of Financial Position
- Statement of Changes in Equity
- Summary of the main accounting principles used by the firm
The auditors must examine each of these to complete the statutory audit.
Which Companies Are Obligated to Be Audited?
Private limited companies must conduct an annual audit of their financial statements with the help of a licensed public accountant. Companies that must undergo audits under Singapore business law must do so for ACRA and other government authorities to verify adherence to regulatory guidelines. The Companies Act states the framework for conducting routine audits, while ACRA serves as the primary regulatory body for company audits.
Audit Exemptions for Select Companies
Certain businesses are exempt from audits in Singapore if they meet specific requirements. These include dormant companies, small groups, and small companies. The Companies Act was amended to exempt small businesses from audits under the Companies (Amendment) Act of 2014. However, even exempt companies may still be audited by ACRA if they violate any laws or rules regarding financial statements during the annual general meeting (AGM) or maintaining accounting records.
Small Companies
Under the Small Company Concept, revised in July 2015, a business will be regarded as a “small company” if it is privately held for the entirety of the current financial year and meets any two of the following requirements for each of the two financial years immediately preceding the current financial year:
- Total annual revenue is less than $10 million
- Overall value of the assets is less than $10 million
- Number of employees is no more than 50
This exemption lowers compliance costs and includes more parties interested in the company’s financial statements, such as customers, employees, and creditors.
Groups of Companies (Small Group)
Holding companies and their subsidiaries may also be exempt from audit compliance if they meet the criteria for a “small group.” The group must satisfy two of the following three requirements in the most recent two financial years:
- Combined revenue cannot exceed $10 million
- Combined total assets cannot be worth more than $10 million
- Overall staff count cannot exceed 50
Dormant Companies
A dormant company is one that has not carried out any transactions from the time of incorporation. The Companies Act states that a company is dormant if it has not made any financial or accounting transactions.
Requirements for an Audit
The three basic audit requirements for a private company laid out by ACRA are the auditors’ appointment, role, and remuneration.
1. Appointment of Auditors
All Singapore companies, unless exempted from audit, must appoint an auditor within three months of incorporation. The auditor must be a certified public accountant or an accounting firm accredited by ACRA. The auditor remains in this position until the shareholders’ first annual general meeting, where the company can choose to retain or appoint a new auditor. Auditors must conduct the audit in compliance with laws and standards, such as the Singapore Standards on Auditing (SSA).
2. Role of Auditor
Companies must create audited financial statements as part of the audit procedures, including the income statement, balance sheet, and cash flow statement. Auditors assess whether the company fairly and accurately depicts its financial status in these statements and identify any significant discrepancies. They also ensure that the financial statements adhere to national and international reporting standards.
3. Remuneration of Auditor
Companies must compensate auditors for their services, although no established law specifies the fees. This fee is determined through discussion between the client and the audit firm. If an audit is conducted by an entity, the company must disclose this in the general meeting, stating the remuneration paid. The AGM decides the auditor’s compensation if the appointment was made by a resolution adopted in the AGM.
Conclusion
Financial audits are a crucial component of maintaining the transparency and accuracy of a company’s financial statements in Singapore. Understanding the audit requirements, including the need for a statutory audit, the role and remuneration of auditors, and the exemptions available for small or dormant companies, is essential for compliance with Singapore’s regulatory framework. Adhering to these regulations not only ensures legal compliance but also enhances the credibility and trustworthiness of your business in the eyes of stakeholders and potential investors. By staying informed and prepared, you can navigate the complexities of financial audits effectively and focus on the growth and success of your company.
