In Singapore, not all companies are required to conduct a statutory audit. Thanks to the audit exemption introduced by ACRA in 2015, many small companies can save time and cost by not undergoing an annual audit — provided they meet certain criteria.
But what exactly are these criteria? How do you know if your company qualifies? And what does audit exemption really mean for your business?
In this article, we break down the audit exemption framework in Singapore, explain who qualifies, and help you understand what audit exemption means from a legal, financial, and operational standpoint.
What Is Audit Exemption?
Audit exemption refers to a waiver of the statutory obligation to have a company’s financial statements audited by a public accountant. This exemption applies only to certain private companies that meet the qualifying criteria set by the Accounting and Corporate Regulatory Authority (ACRA).
Introduced under the Companies (Amendment) Act 2014 and effective from 1 July 2015, the goal of audit exemption is to reduce compliance costs for small companies, while still encouraging good recordkeeping and financial reporting.
Who Qualifies for Audit Exemption?
To qualify for audit exemption in Singapore, a private company must meet the “small company” criteria.
✅ A company is considered a “small company” if:
It is a private company (not a public company), and it satisfies at least two of the following three criteria for the immediate past two consecutive financial years:
- Total annual revenue is not more than S$10 million
- Total assets do not exceed S$10 million
- Number of employees does not exceed 50
For newly incorporated companies, the assessment is based on the first financial year. If the company meets at least two of the criteria for that year, it will be exempt from audit requirements.
Audit Exemption for Companies in a Group
If your company is part of a group, it must qualify both as a small company and as part of a “small group”.
✅ A group qualifies as a “small group” if:
It meets at least two of the three criteria on a consolidated basis for the past two consecutive financial years:
- Consolidated revenue ≤ S$10 million
- Consolidated total assets ≤ S$10 million
- Consolidated total employees ≤ 50
If the group fails to meet the small group criteria, then each company in the group will lose its audit exemption — even if the individual company qualifies on its own.
Examples of Audit Exemption Scenarios
Here are a few sample scenarios to illustrate how the rules work:
✅ Example 1: Standalone Small Company
ABC Pte Ltd is a private company with the following financials over the past two years:
- Annual revenue: S$3 million
- Total assets: S$2 million
- Employees: 20
Since it meets all 3 criteria, it qualifies for audit exemption.
❌ Example 2: Company with High Revenue
XYZ Pte Ltd’s financials are:
- Revenue: S$12 million
- Assets: S$4 million
- Employees: 25
It only meets 2 out of 3 criteria: assets and employees. Since it fails the revenue test, it can still qualify for exemption as long as it meets 2 of the 3 criteria consistently for two financial years.
❌ Example 3: Subsidiary in a Large Group
LMN Pte Ltd meets all small company criteria individually. However, it is part of a group with:
- Consolidated revenue: S$15 million
- Consolidated assets: S$20 million
- Employees: 80
The group fails all three criteria, so LMN Pte Ltd will not be exempt even though it qualifies on its own.
What Audit Exemption Means for Your Company
If your company qualifies for audit exemption, here’s what it means:
✅ No Need to Appoint an Auditor
You don’t need to appoint a statutory auditor or submit audited financial statements with your annual return.
✅ Reduced Compliance Costs
Audits can be expensive, especially for small businesses. Audit exemption helps reduce administrative and financial burdens.
✅ Faster Annual Reporting Process
Without the need to go through audit procedures, you can finalize your financial statements and file annual returns more quickly.
However, audit exemption doesn’t mean exemption from recordkeeping or filing requirements. You are still required to:
- Maintain proper accounting records
- Prepare unaudited financial statements in accordance with the Singapore Financial Reporting Standards (SFRS)
- File Annual Returns with ACRA
- Submit Estimated Chargeable Income (ECI) and Corporate Tax Returns to IRAS
Should You Still Consider a Voluntary Audit?
Just because you are exempt from statutory audit does not mean it’s always best to skip it. Many companies choose to do voluntary audits, especially when:
- Applying for business loans or grants
- Attracting investors or shareholders
- Planning for M&A activities or exit strategies
- Participating in government-supported schemes
- Wanting to strengthen internal controls
Voluntary audits provide additional assurance to stakeholders and can help identify weaknesses in your financial systems.
How to Maintain Your Audit-Exempt Status
Audit exemption is not permanent. Your company must continue to meet the “small company” criteria year after year. Here’s how to stay on track:
- Monitor revenue, assets, and headcount regularly
- Ensure that growth does not push you above the thresholds
- Keep accurate and up-to-date accounting records
- Consider hiring a professional bookkeeper or accounting firm to help
If your company crosses the thresholds for two consecutive years, it will lose audit exemption starting from the third financial year.
What Happens If You Lose Audit Exemption?
If your company no longer qualifies as a small company or part of a small group, you must:
- Appoint an auditor within 3 months after the financial year ends
- Prepare audited financial statements for the relevant financial year
- Present audited accounts at your AGM
- File audited statements with ACRA
Failing to do so can result in penalties, late filing fees, and director disqualification.
Choosing an Auditor When Required
When audit becomes necessary, choose an ACRA-approved audit firm with a good track record. Factors to consider include:
- Industry experience
- Responsiveness and communication
- Transparent pricing
- Familiarity with SMEs
- Ability to support multi-entity or group audits
Firms like Koh & Lim Audit PAC specialize in SME audits and can help ensure your company stays compliant with Singapore regulations.
Conclusion
Audit exemption is a welcome relief for small businesses in Singapore — but it’s important to understand the rules that govern it. If your company meets the small company and small group criteria, you can enjoy lower compliance costs and greater flexibility in your reporting.
However, don’t view audit exemption as a free pass. You’re still responsible for maintaining proper accounts, preparing financial statements, and staying up-to-date with ACRA and IRAS requirements.
If you’re unsure whether your company qualifies for audit exemption or need help with statutory compliance, contact Koh & Lim Audit PAC at +65 98638665 or email Tommyksh@kohlimaudit.sg for a consultation.