Audit Exemption for Private Companies

General Compliance Requirements

Generally, Singapore companies are required to prepare financial statements and have the financial statements audited unless they are exempt from audit requirements.

It should be noted that companies that are exempt from auditing requirements are still required to prepare financial statements unless they also meet the separate criteria to be considered as a dormant company.

Audit Exemption for Small Private Companies

With effect from 1 July 2015, a company is exempt from audit requirements if it is a small company and, if it is a parent or subsidiary company, it is also part of a small group.

Qualification as a small company

To qualify as a small company from a particular financial year, a company must be a private company throughout the entire financial year and satisfies any 2 out of 3 of the following criteria (“size condition”) for each of the 2 previous financial years:

Revenue does not exceed S$10 million,
Total assets do not exceed S$10 million, and
Not more than 50 employees at the end of the financial year.

The size condition described above must be met for each of the previous 2 financial years (i.e. both years). If the condition is not met for any of the 2 previous financial years (i.e., the size condition is met for only 1 year and not the other), the company does not qualify to be considered as a small company.

For a newly incorporated company which has not reached its third financial year (i.e. in its first 2 financial years), the company will qualify as a small company from a financial year onwards if the size condition is met in that year. If the size condition is met in its first financial year after incorporation, a company qualify as a small company from its first financial year onwards. It will qualify as a small company from its second financial year onwards if the size condition is met in its second financial year after incorporation. The company must be a private company throughout the respective financial years.

For older companies incorporated before 1 July 2015, a company will be considered as a small company for the first financial year beginning on or after 1 July 2015 if it is a private company throughout the first financial year and the size condition is met for that first financial year. It will be considered as a small company from the second financial year after 1 July 2015 if it is a private company throughout the financial year and the size condition is met for that second financial year.

A company that qualifies as a small company continues to be so until it ceases to be a small company.

Cessation as a small company

A small company ceases to qualify as a small company from a financial year onwards if it ceases to be a private company or does not satisfy any 2 of the following 3 criteria (“size condition”) for each of the previous 2 consecutive financial years:

Revenue does not exceed S$10 million,
Total assets do not exceed S$10 million, and
Not more than 50 employees at the end of the financial year.

A small company must fail to satisfy the size condition for both of the two previous financial years for it to cease to be a small company. However, if a company ceases to be a private company during a financial year, it will cease to be a small company from that financial year onwards even if it continues to satisfy the size condition.

The above does not apply to a company that has not reached its third financial year after its incorporation or to a company that was incorporated before 1 July 2015 but has not reached its third financial year from that date.

Qualification as a small group

A group qualifies to be a small group if any 2 out of the following 3 criteria are satisfied (“size condition”) for each of the previous 2 consecutive financial years:

Consolidated revenue does not exceed S$10 million,
Consolidated total assets do not exceed S$10 million, and
Aggregate number of employees is not more than 50 at the end of the financial year.

A group that has not reached its third financial year after it is formed will qualify as a small group from the financial year in which the size condition is met. If the size condition met in its first financial year after it is formed, a group will be considered a small group from its first financial year. It will be considered as a small group from its second financial year after its formation if the size condition is satisfied in its second financial year.

A group which is formed before 1 July 2015 will be considered as a small group from its first financial year beginning on or after 1 July 2015 if it satisfies the above size condition for the first financial year. It will be considered as small group from the second financial year onwards if the above size condition is satisfied in the second financial year.

A group that qualifies to be a small group continues to be considered as such until it fails the required conditions and ceases to be a small group.

Cessation as a small group

A small group ceases to be a small group from a financial year onwards if it does not satisfy any 2 of the following 3 criteria (“size condition”) for its previous 2 consecutive financial years:

Consolidated revenue does not exceed S$10 million,
Consolidated total assets do not exceed S$10 million, and
Aggregate number of employees is not more than 50 at the end of the financial year.

The above does not apply to a group that has not reached its third financial year after it is formed or to a group that was formed before 1 July 2015 and has not reached its third financial year after 1 July 2015.

Audit requirements for Non-Private Companies

The exemption from audit requirement is available only to private companies. As such, the public companies such as companies limited by guarantees, which are mainly non-profit organisations, and public companies limited by shares are not exempt from audit requirements. Public companies are required to have their financial statements audited unless they qualify to be considered dormant companies. There are separate criteria to determine if a company is a dormant company.

Voluntary Audit of Financial Statements

An audit of the financial statements may also be required depending on the company’s requirements – e.g. for licensing purposes or regulators or if it is requested by the requisite member or members (shareholders). Even if it is exempt from audit requirements, a company may also choose to have its financial statements audited to obtain assurance. An audit provides a certain level of assurance that the financial statements are free from material misstatements, especially if the financial statements are prepared by personnel who may not be conversant with Financial Reporting Standards (FRSs).

Other benefits of an audit

An audit enables us to acquire detailed knowledge of your business including your business processes and systems of internal controls. We can add value to your business through identifying areas for improvement or potential weaknesses that may result in fraud or error in financial reporting. We can also recommend measures that may mitigate or address risks in your business.

We can help you

While the conditions for exemption from audit may appear simple, application to specific cases may not always be straightforward. We assist Companies in determining their compliance requirements through a review of their specific circumstances for each year. We provide auditing services and will be able to assist you in meeting the compliance requirements if your financial statements need to be audited.

K E Wee & Associates and its affiliates provide services to address the above company financial reporting and tax compliance requirements. Professional fees are dependent on the scope of volume of work required. These are usually driven by type of industry, business size and complexity. Contact us to discuss our services available for all the above requirements and fees.

We are a firm of Public Accountants and Chartered Accountants providing audit and assurance services. If you require your financial statements to be audited, or if you need to know if your financial statements are required to be audited, contact us to explore how we may assist you.