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Audit Exemption in Singapore

A private limited company is the most suitable form of business structure in Singapore. It provides benefits such as limited liability, tax savings, and simple compliance obligations. The Companies Act in Singapore has recently introduced the concept of “small company” that exempts private limited companies that fulfill certain criteria from the requirement of annual audit. This helps the company reduce its compliance costs as well as its overall regulatory burden.

T The Companies (Amendment) Act 2014 revised the audit exemption criteria and introduced the concept of "small companies". The small company concept is applicable to existing as well as newly registered private limited companies in Singapore. This article will explain the small company concept and the qualifying conditions on the basis of which a company can be exempt from the need to perform an annual audit of its accounts.

The New Audit Exemption Criteria The Singapore Companies Act states that every company must get its financial statements and accounting records audited by an auditor on an annual basis unless the company meets the audit exemption requirement. The Companies Act was amended in 2014 to update the audit exemption criteria for companies and introduced the concept of a “small company”. A company that qualifies as a small company is not required to appoint an auditor and have its accounts audited. The Amended Act was made effective starting from July 1, 2015. A company is considered to be a small company if it fulfils at least two out of the following three conditions:

  1. The total annual revenue of the company must not exceed S$10 million;

  2. The total assets of the company for the financial year end must not exceed S$10 million;

  3. The number of full-time employees at the end of the financial year must not exceed 50.

Besides private companies, group companies (holding and subsidiary companies) can also avail the audit exemption if they qualify as a small group per the criteria described below. Group Company Audit Requirement A group company is defined as a holding company and its subsidiaries that together form a group due to a common source of control. A group company will be exempt from annual audit of its accounts if the holding and all subsidiary companies individually:

  1. Fulfil at least 2 of the small company qualifying conditions and

  2. Belong to a “small group”

To qualify as a “small group”, the group (comprising of all the companies) must fulfil two out of the following three conditions in the immediate two preceding financial years:

  1. The consolidated revenue must not exceed S$ 10 million;

  2. The consolidated total assets must not exceed S$ 10 million;

  3. The total number of employees of the group must not exceed 50.

In other words, this means that to qualify for the audit exemption, the individual subsidiary companies as well as the holding company, as a group, must fulfil the eligibility criteria of a small company.

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