When Can a Group Be Exempted from Audit in Singapore?

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Auditing is a crucial part of maintaining corporate transparency and governance in Singapore. Nevertheless, not every company or group needs to undergo an audit every year. Certain group entities can be exempted from audit requirements if they meet specific qualifying conditions outlined under the Companies Act.

For business owners managing multiple entities, understanding how group audit exemption works can help reduce costs and streamline operations. In this article, we explore the circumstances under which a group may be exempted from audit in Singapore.

What is a Group Audit?

A group audit refers to the process of auditing a parent company’s consolidated financial statements, which incorporate the financials of all its subsidiaries. This ensures that the group’s overall financial position and results are fairly presented.

In Singapore, group audits must comply with Singapore Standards on Auditing (SSA) 600, which guides auditors on handling the complexities of auditing multiple related entities.

Default Position: Group Audits Are Generally Required

Generally, under Singapore law, all companies, including those that form part of a corporate group, are required to have their financial statements audited. Audit ensures compliance, enhances credibility, and builds stakeholder trust.

However, there are audit exemptions available if specific conditions are fulfilled.

Audit Exemption Criteria for Groups

1. Meeting the “Small Group” Criteria

The primary basis for a group audit exemption is qualifying as a small group. According to the Companies Act, a group is treated as small if it fulfills at least two of the following three conditions over two consecutive financial years:

  • Total consolidated revenue does not exceed S$10 million;
  • Total consolidated assets do not exceed S$10 million;
  • The total number of employees does not exceed 50 at the end of the financial year.

The above criteria are measured based on group-wide consolidated figures, meaning the combined metrics of the parent and its subsidiaries.

2. Newly Formed Groups

For newly formed groups, the assessment is made based on the first or second financial year after incorporation. If the small group conditions are satisfied in either year, audit exemption can be obtained without needing two years of history.

3. Dormant Companies Within the Group

Dormant companies — those with no accounting transactions during a financial year — are another area where audit exemptions apply.

  • Dormant subsidiaries can claim audit exemption.
  • Dormant parent companies must still assess if consolidated financials are necessary but may avoid audits if specific conditions are met.

Proper declarations must be made to ACRA to confirm dormant status.

Key Considerations Even With Audit Exemption

Even if audit exemption is achieved, businesses must adhere to several responsibilities:

a) Preparation of Financial Statements

Exemption from audit does not mean exemption from financial reporting. Companies must still:

  • Prepare financial statements aligned with Singapore Financial Reporting Standards (SFRS).
  • Present these financials to shareholders at the AGM.

b) Good Record-Keeping Practices

Companies must maintain detailed records of:

  • Transactions and supporting documents.
  • Registers of shareholders, officers, and directors.

Inadequate record-keeping can result in regulatory penalties even if an audit is not performed.

c) Internal Financial Controls

While external audits may not be mandatory, strong internal controls are vital. Many groups voluntarily conduct internal reviews or opt for non-statutory audits to maintain good financial discipline.

When a Group May Lose Its Audit Exemption

A group that previously qualified for exemption must continuously monitor its status. A group will lose its audit exemption if:

  • Revenue exceeds S$10 million.
  • Assets surpass S$10 million.
  • The number of employees grows beyond 50.

Once a group fails to meet the small group criteria for a financial year, it must appoint an auditor and perform an audit from that year onwards.

Advantages of Group Audit Exemption

Some benefits of qualifying for group audit exemption include:

  • Cost efficiency: Audit expenses can be saved, particularly across multiple subsidiaries.
  • Time savings: Less time spent preparing for external audits.
  • Operational agility: Management can focus more on business expansion rather than compliance exercises.

However, these advantages must be balanced with the risk of missing out on the benefits of external financial verification.

Final Thoughts

In Singapore, a group can be exempted from audit obligations if it qualifies as a small group under the Companies Act criteria relating to revenue, assets, and employee count. Dormant subsidiaries may also individually enjoy audit exemption.

Nevertheless, even exempt groups must prepare proper financial statements, ensure sound accounting practices, and be vigilant about their size metrics to maintain compliance.

For growing businesses or those seeking external investment, it may still be worthwhile to engage voluntary auditors to assure stakeholders of the group’s financial health and governance standards.

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