Running a business in Singapore comes with a range of statutory obligations. One of the most important for companies that do not qualify for audit exemption is the annual statutory audit. Whether you’re a first-time entrepreneur or managing an established business, understanding the statutory audit process is crucial to staying compliant with Singapore’s legal and regulatory framework.
In this article, we’ll explain what a statutory audit is, who needs one, what the process involves, and how to prepare for it — so your business stays on the right track.
What Is a Statutory Audit?
A statutory audit is an independent examination of a company’s financial statements, conducted by a certified public accountant (CPA) or audit firm approved by the Accounting and Corporate Regulatory Authority (ACRA). The objective is to express an opinion on whether the financial statements give a true and fair view of the company’s financial performance and comply with the Singapore Financial Reporting Standards (SFRS).
This audit is required by law for certain companies and forms part of the company’s compliance obligations under the Singapore Companies Act.
Why Is a Statutory Audit Important?
A statutory audit is more than just a legal requirement — it adds value to your business in several ways:
- Ensures compliance with ACRA and IRAS regulations
- Improves transparency and accountability to shareholders and stakeholders
- Detects errors or fraud in the financial system
- Reveals operational inefficiencies through insights into internal controls
- Builds trust with investors, lenders, and potential partners
Many grants, bank loans, and due diligence exercises (e.g. during M&A) require audited financial statements, so staying audit-ready is a smart business move.
Who Needs to Undergo a Statutory Audit in Singapore?
Not all companies in Singapore are subject to audit. Under Singapore’s Companies Act, private companies that qualify as “small companies” are exempted from statutory audits.
You qualify for audit exemption if your company meets at least 2 of the following 3 criteria for the past two consecutive financial years:
- Total annual revenue is ≤ S$10 million
- Total assets are ≤ S$10 million
- Number of employees is ≤ 50
For companies that are part of a group, the entire group must qualify as a “small group” to enjoy audit exemption.
If your company does not qualify, you are legally required to appoint an auditor and submit audited financial statements annually.
When Must a Statutory Audit Be Done?
Companies that require a statutory audit must appoint an auditor within 3 months of incorporation. After that, statutory audits must be conducted annually, covering each financial year.
Typically, the audit is completed after the financial year ends and before the Annual General Meeting (AGM) and filing of the Annual Return with ACRA.
Key deadlines include:
- Financial Year-End (FYE): Companies choose their own FYE (e.g., 31 Dec or 31 Mar)
- AGM: Must be held within 6 months after FYE
- Annual Return Filing: Must be filed within 7 months after FYE
The audit must be completed in time to present audited financial statements during the AGM.
What Does the Statutory Audit Process Involve?
Here is a breakdown of the typical statutory audit process in Singapore:
1. Engagement and Planning
The auditor issues an engagement letter outlining the scope, objectives, timeline, and responsibilities of both parties. They also review your prior year’s audit (if applicable) and business operations to plan the audit strategy.
You will need to provide basic documents such as:
- Company BizFile
- Constitution
- Financial statements
- Chart of accounts
- Details of key personnel
2. Risk Assessment and Understanding Your Business
The auditors will assess your internal control environment and identify potential areas of financial misstatement. This helps them focus their audit efforts on higher-risk areas such as:
- Revenue recognition
- Inventory valuation
- Related party transactions
- Cash and bank reconciliations
3. Audit Fieldwork (Testing Phase)
This is the core part of the audit. The auditors will perform tests and reviews including:
- Vouching sales and purchase invoices
- Verifying bank balances and reconciliations
- Reviewing expense claims
- Testing payroll records
- Performing stock counts or reviewing inventory records
- Inspecting contracts and agreements
They will also check the accuracy of general ledger accounts and ensure compliance with accounting standards.
4. Discussion of Findings
After fieldwork, the audit team prepares an initial list of findings or discrepancies. These are discussed with management to allow for explanations or adjustments, if necessary. A management letter may be issued with recommendations for improvements.
5. Issuance of the Audit Report
Once the audit is complete and all issues are resolved, the audit firm issues an audit report as part of the final financial statements.
The report expresses an audit opinion, which may be:
- Unqualified (Clean) Opinion – Financial statements are fair and compliant
- Qualified Opinion – Some exceptions or limitations exist
- Adverse Opinion – Financial statements are materially misstated
- Disclaimer of Opinion – Auditor could not obtain sufficient evidence
A clean opinion is ideal and boosts your business’s credibility.
Common Audit Documents and Information Required
To streamline your audit process, prepare the following:
- Trial balance and general ledger
- Financial statements and notes
- Bank statements and reconciliations
- Sales and purchase invoices
- Payroll records and CPF contributions
- Fixed asset register
- Inventory records (if applicable)
- Contracts and loan agreements
- Tax computations and IRAS filings
- Previous audit reports and management letters (if any)
Using accounting software like Xero, QuickBooks, or MYOB can help keep your records organized and audit-ready.
How to Prepare for an Annual Statutory Audit
Here are some practical tips:
✅ Keep Records Updated
Update your accounts monthly. Don’t wait until year-end to close your books.
✅ Assign a Liaison
Designate someone internally to coordinate with auditors and provide documents promptly.
✅ Resolve Prior-Year Issues
Address any weaknesses or audit issues raised in previous audits.
✅ Communicate Early
Inform auditors of any major changes (e.g., new subsidiaries, restructuring) well in advance.
Choosing the Right Audit Firm
It’s important to work with a qualified and experienced audit firm registered with ACRA. The firm should be:
- Familiar with your industry
- Transparent in fees
- Responsive and communicative
- Clear in explaining audit findings
- Proactive in helping you meet deadlines
Firms like Koh & Lim Audit PAC specialize in audit services for Singapore SMEs and provide end-to-end support with professionalism and integrity.
What Happens If You Don’t Comply?
Failing to conduct a statutory audit or submit audited financial statements can lead to:
- ACRA penalties and fines
- Late filing fees
- Disqualification of directors for persistent non-compliance
- Reputational damage with banks, investors, or partners
Avoid these risks by ensuring that your company meets its audit obligations.
Conclusion
An annual statutory audit is a critical part of financial governance and compliance in Singapore. If your company is not exempt, it is your legal responsibility to conduct an audit and file your audited financial statements annually.
But more than that, a proper audit can help strengthen your internal controls, improve transparency, and build trust with stakeholders.
Need help with your statutory audit? Contact Koh & Lim Audit PAC today at +65 98638665 or email Tommyksh@kohlimaudit.sg for expert guidance and hassle-free audit support.