If you run a company in Singapore, one question you’re likely to face as you grow is: “Do I need to appoint an auditor?” Understanding your company’s audit obligations is essential to stay compliant with the Accounting and Corporate Regulatory Authority (ACRA), avoid penalties, and maintain investor or stakeholder trust.
This article explains ACRA’s audit requirements in plain language and helps you determine whether your company needs an auditor — or qualifies for audit exemption.
What Is a Statutory Audit in Singapore?
A statutory audit is a legally required review of a company’s financial statements. It must be carried out by a public accountant registered with ACRA. The goal is to ensure that the financial statements give a true and fair view of the company’s financial performance and position, in accordance with Singapore Financial Reporting Standards (SFRS).
Audits serve many purposes — from fulfilling compliance obligations to boosting transparency for stakeholders such as shareholders, investors, lenders, and government agencies.
The Key Question: Do You Need to Be Audited?
Under Section 205B of the Singapore Companies Act, all companies are required to appoint an auditor within 3 months from the date of incorporation, unless they meet the criteria for audit exemption.
Let’s explore the audit exemption rules in detail.
What Is the Audit Exemption in Singapore?
As of 1 July 2015, Singapore companies that qualify as “small companies” are exempted from statutory audit requirements.
To qualify as a small company, your private limited company must meet at least 2 of the 3 following criteria for the past two consecutive financial years:
- Total annual revenue ≤ S$10 million
- Total assets ≤ S$10 million
- Number of employees ≤ 50
For a newly incorporated company, the assessment is made based on its first financial year.
If the company is part of a group, both the individual company and the group as a whole must qualify as small companies or small groups, respectively, for audit exemption to apply.
Examples of Audit Obligation Scenarios
To clarify how this works, here are a few examples:
✅ Example 1: A small retail company
- Revenue: S$2 million
- Assets: S$1.5 million
- Employees: 15
This company clearly meets all 3 criteria, so audit is not required.
❌ Example 2: A tech company with strong investor funding
- Revenue: S$500,000
- Assets: S$12 million
- Employees: 20
Despite the low revenue, the total assets exceed S$10 million. It only meets 2 of 3 criteria. If this is consistent across two years, audit may still be required.
❌ Example 3: A subsidiary of a large group
- Company alone meets all 3 criteria
- Group’s consolidated revenue exceeds S$20 million
Since the group fails the small group test, this subsidiary is not exempt from audit.
Why Does ACRA Require Some Companies to Be Audited?
ACRA’s mandate is to promote business transparency and protect the interests of the public and investors. Companies that are larger or more complex in operations are more likely to impact stakeholders, hence the need for independent financial assurance through audits.
Audits help detect financial misstatements, fraud, and operational inefficiencies. They also ensure businesses comply with laws and maintain proper books of account — which is especially important for companies with external shareholders or public interest.
When Should You Appoint an Auditor?
If your company is not exempt from audit, you are legally required to appoint an auditor within 3 months of incorporation.
Failure to do so can result in regulatory action and penalties. If your company only becomes non-exempt after growing beyond the small company thresholds, you should appoint an auditor as soon as your status changes.
For example, if your company crosses the S$10 million revenue and asset thresholds and maintains this status for two consecutive financial years, you’ll need to start preparing for audit from the third year onwards.
What Happens If You Don’t Comply?
Non-compliance with audit requirements can lead to:
- Penalties and fines from ACRA
- Inaccurate or incomplete Annual Return filings
- Delays or issues with investor funding or bank loans
- Reputational damage for your company
Additionally, directors are responsible for ensuring compliance, and repeated breaches may lead to director disqualification under the Companies Act.
Benefits of Voluntarily Getting Audited
Even if you qualify for audit exemption, some businesses choose to get audited voluntarily — and for good reason.
Here’s why you might still want an audit:
✅ Credibility with Investors and Lenders
Audited financials demonstrate transparency and boost investor confidence, especially during fundraising or loan applications.
✅ Better Corporate Governance
Audits help highlight internal control weaknesses and accounting errors, enabling better management and risk oversight.
✅ Compliance with External Requirements
Some grant schemes (e.g., Enterprise Singapore) or business partners may require audited accounts as part of due diligence.
✅ Smooth Transition to Growth
If your business is rapidly growing, having audits early on can prepare you for the time when audits become mandatory.
Choosing the Right Audit Firm in Singapore
If you determine that your company needs to be audited — either because it’s legally required or for internal reasons — choosing the right audit firm is crucial.
Here are some tips:
- Ensure the auditor is ACRA-registered
- Look for firms with experience in your industry
- Consider firms that offer clear fee structures and personalized service
- Review their responsiveness and client support
Firms like Koh & Lim Audit PAC offer tailored statutory audit services for SMEs, helping business owners navigate compliance with clarity and ease.
How to Prepare for an Audit
If you need to undergo an audit, it’s important to start preparing early. Here are some practical tips:
- Maintain complete and updated bookkeeping records
- Use cloud accounting software to track income and expenses
- Ensure proper documentation of sales, purchases, and payroll
- Prepare a fixed asset register and reconcile your bank accounts
- Assign a team member as the point of contact for the auditors
Being prepared reduces audit costs, speeds up the process, and minimizes disruption to business operations.
Conclusion
Understanding whether your business needs to be audited is more than just a compliance matter — it’s about being prepared for growth, attracting stakeholders, and operating with transparency.
If your company does not qualify for audit exemption, make sure to appoint an auditor on time and stay compliant with ACRA regulations.
Even if you are exempt, consider voluntary audits for the long-term benefits they bring to governance and credibility.
Need help understanding your audit obligations or choosing an auditor? Contact Koh & Lim Audit PAC today at +65 98638665 or email Tommyksh@kohlimaudit.sg for a consultation.