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While every registered company is required to submit their statements and undergo an audit every year, there are certain companies that may be exempted from this. An audit exemption is a provision that exempts certain types of companies from the requirement of having their financial statements audited by a qualified auditor or accountant registered with the Accounting and Corporate Regulatory Authority (ACRA).
The audit exemptions have always been grounded on the Companies (Amendment) Act 2014, but this has since been amended and revised to introduce the concept of small companies, which is a title applicable to both existing and newly registered private limited companies in Singapore.
In this article, we’ll go over the criteria and provisions under the updated guidelines. Small companies that are now eligible for audit exemptions may check to see whether they pass the criteria.
Audit Exemption Criteria
Under new amendments, small businesses can now be eligible for audit exemption under specific criteria. A small company is qualified for audit exemption if it meets at least two of the following conditions:
- The company’s total revenue does not exceed 10 million SGD
- The company’s total assets for the financial year end does not exceed 10 million SGD
- The number of full-time employees at the end of the company’s financial year does not exceed 50
On the other hand, some private limited companies may also be eligible for audit exemption if they meet certain criteria. Private limited companies qualify for audit exemption for any of the following reasons:
- The company is a dormant company, which is defined as a company that has been dormant since its incorporation or has been dormant for the entire financial year
- The company is an exempt private company with an annual revenue that does not exceed 5 million SGD
Group companies—a holding company and all of its subsidiaries—may also be eligible for this exemption if all the subsidiary companies and businesses:
- Fulfill at least two of the small company conditions
- Are a relatively small group of companies, defined as whether two of the small company conditions are met in two consecutive financial years
It is important to note that exempted companies and businesses will still need to prepare and file financial statements in compliance with the Singapore Financial Reporting Standards (SFRS) or the International Financial Reporting Standards (IFRS) and submit these to ACRA at least once every fiscal year as a basis for calculating tax returns.
Disqualification Criteria
As there are criteria for eligibility, there are also factors that can disqualify a company from audit exemption, particularly for small companies. It is worth noting that a company will instantly forfeit their label as a small company in the following situations:
- The company adds a 51st shareholder any time in a fiscal year
- The company issues shares to the public any time in a fiscal year
- The company has violated more than two small company conditions for the last two financial years
Transitional Provisions
What if a small company was incorporated before the amendment, are they still eligible for audit exemption?
In order to accommodate companies that have been incorporated before the changes in the Companies (Amendment) Act 2014, these companies have also been allowed to avail the audit exemption should they fulfill at least two of the following criteria:
- The company has been a private firm since July 1, 2015
- The company has met the set of requirements to qualify as a small company in the first or second year after changes in the act have been passed
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