As a business owner in Singapore, the term “audit” may sound intimidating, especially if it’s your first time undergoing one. However, understanding the audit process and what is expected of your company can ease the anxiety and help you prepare effectively.
In this comprehensive guide, we’ll walk you through what to expect during an audit in Singapore, from the requirements to the process, and how you can stay compliant while adding value to your business.
What Is an Audit?
An audit is an independent examination of a company’s financial statements by a qualified auditor. The main goal is to ensure that the statements are true, fair, and comply with the applicable accounting standards.
In Singapore, statutory audits are governed by the Companies Act and are typically conducted in accordance with the Singapore Standards on Auditing (SSA). The audit must be performed by a public accountant registered with the Accounting and Corporate Regulatory Authority (ACRA).
Who Needs to Be Audited in Singapore?
Not all companies in Singapore are required to undergo an audit. Since 1 July 2015, Singapore introduced the audit exemption for small companies.
To qualify for audit exemption, a private company must satisfy at least two of the following three criteria for the past two consecutive financial years:
- Total annual revenue ≤ S$10 million
- Total assets ≤ S$10 million
- Number of employees ≤ 50
If your company is part of a group, the group as a whole must also meet these criteria on a consolidated basis to be exempted.
If your company doesn’t qualify for audit exemption, you are legally required to appoint an auditor and submit audited financial statements as part of your annual return filing with ACRA.
Objectives of a Statutory Audit
The main objective of a statutory audit is to provide assurance to shareholders, investors, regulators, and other stakeholders that the company’s financial records are accurate and free of material misstatements, whether due to fraud or error.
Audits help to:
- Enhance transparency and corporate governance
- Build credibility with banks and investors
- Detect potential risks or weaknesses in financial reporting
- Ensure compliance with laws and financial reporting standards
The Audit Process in Singapore
Here’s a general breakdown of what you can expect during a statutory audit:
1. Engagement and Planning
The audit firm will first issue an engagement letter outlining the scope, objectives, responsibilities, and timelines for the audit. They will also assign an audit team.
During the planning phase, the auditors will gain an understanding of your business, industry, accounting processes, and internal controls. They may ask for:
- Prior year audited financial statements
- Corporate documents (e.g., ACRA BizFile, Constitution)
- Access to key personnel for interviews
- Information on internal accounting systems
2. Risk Assessment
Auditors will assess the risks of material misstatement in your financial reports. This helps them determine which areas need more attention. For example, revenue recognition, inventory valuation, or related party transactions may be flagged for deeper review.
3. Fieldwork and Testing
This is the most detailed part of the audit. The auditors will conduct testing procedures on your company’s financial transactions and balances. These may include:
- Reviewing sales and purchase invoices
- Testing bank reconciliations
- Confirming balances with customers, suppliers, or banks
- Examining expense claims and supporting documents
- Verifying physical inventory (if applicable)
They will also evaluate your internal control systems to determine whether they are effective and reliable.
4. Audit Findings and Discussion
After completing fieldwork, the auditors will compile their findings. If they identify discrepancies, control weaknesses, or non-compliance issues, they will communicate these to management.
You’ll be given the opportunity to provide explanations or take corrective actions. This phase is often referred to as the management letter discussion.
5. Issuance of Audit Report
Finally, the audit firm will issue the auditor’s report, which forms part of your company’s financial statements. This report will state whether your financial statements give a true and fair view in accordance with Singapore Financial Reporting Standards (SFRS).
The report may include:
- Unqualified opinion: Financials are fair and compliant
- Qualified opinion: Some reservations or limitations exist
- Adverse opinion: Financials are materially misstated
- Disclaimer of opinion: Auditor cannot express an opinion
How to Prepare for Your Company Audit
Being well-prepared not only reduces audit stress but also lowers the chances of delays or unfavorable opinions.
Here’s how you can get audit-ready:
✅ Keep Clean, Up-to-Date Records
Make sure your accounts, ledgers, and documentation are regularly updated and reconciled. Use accounting software like Xero or QuickBooks to stay organized.
✅ Assign a Point of Contact
Designate an employee who is familiar with the company’s finances to be the liaison for the audit team. This helps to streamline communication and reduce confusion.
✅ Compile Required Documents
Common documents auditors may request include:
- General ledger and trial balance
- Bank statements and reconciliations
- Fixed asset register
- Sales and purchase invoices
- Employee payroll records
- Loan agreements and contracts
✅ Review Prior Year Audit Issues
If your company was audited in the previous year, revisit the past audit findings and ensure that those issues have been addressed.
Benefits of a Good Audit Experience
Although audits are a regulatory requirement for many companies, they can also provide strategic value. A well-conducted audit helps you:
- Build investor and lender confidence
- Identify inefficiencies or potential fraud
- Strengthen internal controls and processes
- Make better financial and operational decisions
- Prepare your company for future growth or IPO
Choosing the Right Audit Firm in Singapore
Selecting a reliable and experienced audit firm is critical. Look for a firm that:
- Is registered with ACRA
- Has experience in your industry
- Offers transparent pricing
- Provides clear communication and support
- Maintains independence and professional ethics
Firms like Koh & Lim Audit PAC, for example, specialize in statutory audits for Singapore SMEs and can guide you through the entire process with minimal disruption to your operations.
Conclusion
Undergoing an audit doesn’t have to be stressful. By understanding the audit process in Singapore and preparing in advance, you can ensure a smooth and valuable experience.
Whether it’s your first audit or a recurring one, treat it as an opportunity to strengthen your company’s financial practices and reinforce trust with your stakeholders.
If you’re looking for a dependable and professional audit firm in Singapore, reach out to Koh & Lim Audit PAC at +65 98638665 or email Tommyksh@kohlimaudit.sg for a consultation.