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How Small Companies Can Qualify for Audit Exemptions

In Singapore, every company is responsible for getting its financial statements and accounts checked by an external auditor at least once a year. This allows a company’s accounting records to be examined objectively giving shareholders greater confidence in the business.

However, there are some situations where companies may be exempted from auditing, especially if you are a small company. By the way, if you find accounting a chore, our accountants can put together your paperwork, check numbers, and file annual returns on time for you, perfect for busy founders.

What is an audit exemption?


On 1 July 2015, the Companies (Amendment) Act was put into effect, allowing more small companies to qualify for an audit exemption in Singapore.

What are the criteria for an audit exemption in Singapore?

To qualify, companies must:
1. Be a private limited company over the two preceding financial years.
2. Be considered a small company, with at least 2 out of 3 of these criteria met:

  • Have a total annual revenue not exceeding S$10 million
  • Have 50 full-time employees or less at the end of the financial year
  • Have total assets not exceeding S$10 million (as at the end of the financial year) annual revenue of $5 million or less

What is a private limited company?

A private company — also known as a private limited company — is defined as one that has a minimum of 20 shareholders, but no more than 50 shareholders. Unlike public companies, private companies cannot sell shares to the public. But they can issue stock or additional shares to existing shareholders.

What if my company was incorporated before July 2015?

If your company was registered and incorporated before 1 July, 2015, it could still qualify for an audit exemption as. As long as:

  1. It is a private company, and
  2. It meets the above criteria for a small company, whether in the first or second financial year after 1 July, 2015.

To put things into perspective, let’s use the example of a fictional company, Coracle & Co, which was incorporated as a private limited company on 1 January, 2015.

At the end of the financial year — and on 31 December 2015 — Coracle & Co had a total annual revenue of S$5 million, 40 full-time employees, and total assets valued at S$3 million.

In the following financial year — and on 31 December 2016 — Coracle & Co had a total annual revenue of S$8 million, 48 full-time employees, and total assets valued at S$9 million.

The company was not publicly listed, and therefore did not offer shares for sale.

Here’s a closer look at whether Coracle & Co meets the qualifying criteria for an audit exemption.

Qualifying criteria Does Coracle & Co meet the definitions of a small company?
Your company meets the criteria for a small company (as set out above) for the financial year of 2015 Yes; it fulfilled all three criteria for what defines a small company
Your company meets the criteria for a small company (as set out above) for the financial year of 2016 Yes; it fulfilled all three criteria for what defines a small company
Your company meets the criteria for a small company (as set out above) over two preceding financial years Yes; it fulfilled the criteria for a small company for the financial years ended 2015 and 2016

Can group companies qualify for an audit exemption?


If you have a Group of companies, then your holding company (also known as a Parent company) and its subsidiaries could qualify for an audit exemption if it fulfills the criteria as stated above.

In essence, if your group is looking for an audit exemption for the financial year ended 2020, it must meet the above criteria for a small group in the financial years of 2018 and 2019.

Your group’s individual companies should also each meet the definitions of a small company.

Can a company be disqualified from audit exemption?

Yes, it can A company can be disqualified from audit exemption if it:

  • Is no longer operating as a private company in the financial year
  • Fails to satisfy the criteria for a small company in the two preceding financial years.

My company meets the audit exemption criteria. Am I still required to prepare and file my accounts?

Regardless of whether your company is exempted from an audit, it is crucial that you maintain proper bookkeeping records, since your business’ annual financial statements are required when filing for Corporate Income Tax Returns.

Finding bookkeeping a hassle? Send us your docs the minute you have them: we reconcile every 24 hours and show what’s missing. Outsource your bookkeeping to us.

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