The island state of Singapore takes pride in being a haven when it comes to business structures. Its regulatory regime has earned it a good reputation for being rather attractive to do business in, especially in matters that require transparency and accountability. The audit requirement in Singapore ACRA are some of those important requirements for businesses under the Accounting and Corporate Regulatory Authority of Singapore and Inland Revenue Authority of Singapore. This is not all, since the audit exemption of Singapore companies does not include all companies from undergoing such a process. The brief overview of the audit requirement in Singapore ACRA, the IRAS audit exemption, and the Audit Exemption Criteria in Singapore are given below.
Audit Requirement in Singapore (ACRA)
An audit requirement in Singapore ACRA means the independent examination of financial statements of the company by an external auditor, making financial reporting both accurate and transparent. In Singapore, companies are generally obliged to appoint an auditor within three months unless they have qualified for audit requirement in Singapore ACRA exemption.
The requirement by Singapore ACRA ensures that the company complies with the financial reporting standards laid down by ACRA for protection of the interest of its shareholders, its creditors, and others. Financial statements need to be prepared according to the Singapore Financial Reporting Standards and filed with the Company’s annual return to the ACRA.
Those companies which do not satisfy the criteria for audit exemption will have to undergo an annual statutory audit requirement in Singapore ACRA. This would mean that the auditor has to go through the books in detail to ensure that they represent the true and fair value of the financial status of the company. The auditor’s report then needs to be filed with ACRA when the company files its annual return. Non-compliance with ACRA’s audit requirements may result in penalties, fines, and even striking off the company from the ACRA register.
ACRA Audit Requirements for Companies in Singapore
Criteria for Audit Exemption in Singapore
Singapore’s regulatory framework stipulates a set of clear criteria for audit requirement in Singapore ACRA that are designed to lessen the administrative and financial burden on smaller companies. It exempts qualified companies from certain costly and time-consuming statutory audit procedures.
For exempting audits, it must be qualified as a “small company” under the Singapore Companies Act. A company will qualify if it has met at least two out of the following three criteria for the immediate past two consecutive financial years:
- Revenue Requirement: The ultimate total gross revenue of the company has not exceeded SGD 10 million.
- Asset Requirement: The total assets of the company have not exceeded SGD 10 million.
- Number of Employees: The company is required to have no more than 49 employees.
In addition, if a company is itself part of a group, then the group would have to meet the above conditions on a group basis before the company could be exempt from an audit.
Where audit exemption means a lot to smaller businesses, as this could give them more freedom to focus on their resources and growth of the company rather than spending too much effort on compliance matters. Even though small companies are exempt from getting an audit, they are still required to prepare their financial statements in accordance with SFRS and filing with ACRA on an annual basis.
Understanding the Criteria for Audit Exemption in Singapore
Exploring IRAS Audit Exemption Criteria for Singapore Companies
Besides the auditing requirements by the ACRA, there are also tax requirements by IRAS that companies in Singapore should adhere to. The audit exemption provided by IRAS is closely related to the audit exemption provided by the ACRA; however, it relates to the exemption of a company from filing its taxes.
The companies that qualify for the audit requirement in Singapore ACRA can also qualify for an IRAS audit exemption. This will mean that the small companies fulfilling the audit exemption criteria would not be required to provide audited financial statements for tax purposes. Thus, such companies can provide unaudited financial statements at the time of filing their annual tax return with IRAS.
It is worth noting, though, that IRAS has the right to conduct an audit and even request additional financial documents if there is suspicion of discrepancies in the tax filings. This means that even those companies qualified for audit exemption by IRAS must ensure that records are in order and current.
Key Insights on IRAS Audit Exemption for Singapore Businesses
Benefits of Audit Exemption for Singapore Companies
The audit exemption for Singapore companies has several advantages for companies, especially SMEs:
Cost Savings: Audits can be very costly to conduct more so for small companies. Audit exemption qualifies companies for this exception and hence saves on audit fees that have become available for expansion or product development in business.
Administrative Burden: An audit is a time-consuming process which involves high administrative efforts. It does not interfere with the normal running of core business activities in an audit-exempt company.
Financial Reporting: Although the financial statements are to be prepared for audit-exempt companies, they are not subject to strict reporting requirements similar to those for audited companies. There is flexibility in financial reporting.
It will encourage business enterprise to grow: The audit exemption is designed in a way to reduce compliance costs and obligations for smaller businesses, which will enable SMEs to focus on operational growth and competitiveness in the marketplace.
Exploring the Benefits of Audit Exemption for Singapore Companies
Companies That Do Not Qualify for Audit Exemption
While a lot of small companies fall under audit exemption status, larger companies, and those failing to meet the exemption criteria, all require a statutory audit. Some examples include:
- Public companies, including those listed on the Singapore Exchange.
- Companies meeting at least two of the following: revenue above SGD 10 million for the financial year, more than SGD 10 million in total assets, or having more than 50 employees.
Moreover, for companies being part of larger corporate groups, the audit exemption criteria have to be satisfied on a consolidated basis. In this case, if the group as a whole cannot satisfy the qualification criteria, then the company has to get itself audited even though it satisfies the small company criteria at the individual level.
Filing Requirements for Audit-Exempt Companies
Even if the company qualifies for audit exemption, it would not be completely exempt from relevant regulatory requirements. For example, an audit-exempt company needs to prepare unaudited financial statements in accordance with SFRS and file these with ACRA annually. This constitutes the annual return of the company and hence needs to be filed within seven months after the financial year-end.
Besides filing its financial statements with ACRA, the company will have to submit the annual returns with IRAS. If the company qualifies for the audit exemption in IRAS, it can file unaudited financial statements as its tax filing.
Conclusion
In conclusion, the audit requirement in Singapore ACRA by One IBC plays a vital role in maintaining financial transparency and accountability for Singapore companies. While smaller companies may qualify for audit exemptions, those meeting specific criteria must undergo annual audits to ensure compliance with legal standards. This process not only fosters trust among stakeholders but also enhances corporate governance. By understanding and adhering to these requirements, companies can mitigate risks, avoid penalties, and position themselves for sustainable growth. Ultimately, compliance with ACRA’s audit regulations is essential for building a reputable and financially sound business in Singapore.
