What Are the Criteria for Singapore Businesses to Need Corporate Audit Services?

In Singapore, corporate audits are an essential aspect of regulatory compliance and financial transparency. However, not all businesses are required to undergo statutory audits. The obligation to conduct an audit depends on specific criteria set by the Accounting and Corporate Regulatory Authority (ACRA) under the Companies Act. Understanding whether your business needs audit services is crucial not only to avoid legal penalties but also to enhance investor trust and corporate governance.

In this article, we will explore the key criteria that determine whether a Singapore business needs corporate audit services, the importance of audits, exemptions available, and the benefits of engaging an audit firm even if your company is exempt.

What Is a Statutory Audit?

A statutory audit is an independent examination of a company’s financial statements by a qualified auditor. The purpose is to provide assurance that the financial reports are free from material misstatements and prepared in accordance with the Singapore Financial Reporting Standards (SFRS).

Audited financial statements are commonly required by stakeholders such as banks, investors, regulators, and government agencies.

Criteria That Require a Business to Be Audited in Singapore

Under the Companies Act (Cap. 50), the requirement to appoint auditors and conduct audits applies primarily to companies that are not exempt private companies or do not qualify for the small company audit exemption. Here's a breakdown of the criteria:

1. Company Type: Exempt Private Company (EPC) vs Non-EPC

An Exempt Private Company (EPC) is defined as:

• A private company with no more than 20 shareholders, and

• No corporate shareholder (i.e., all shareholders must be individuals).

Previously, EPCs with annual revenue of less than S$5 million were exempted from audits. However, from 1 July 2015, ACRA introduced the small company criteria, which applies to both EPCs and other private companies.

2. Small Company Audit Exemption (Effective from 1 July 2015)

A company is considered a small company and is exempt from audit if it meets at least 2 out of the following 3 criteria for the immediate past two consecutive financial years:

• Total annual revenue ≤ S$10 million

• Total assets ≤ S$10 million

• Number of employees ≤ 50

If your company meets the small company definition, you are not required by law to have your financial statements audited.

3. Group Company (Group Consolidation Rules)

If your company is part of a group of companies, the entire group must meet the "small group" exemption criteria to qualify for audit exemption. A group is considered a small group if it meets at least 2 out of 3 quantitative criteria on a consolidated basis:

• Consolidated revenue ≤ S$10 million

• Consolidated total assets ≤ S$10 million

• Consolidated number of employees ≤ 50

If the group fails to meet the criteria, all companies in the group must be audited, regardless of whether they individually qualify as small companies.

Situations That May Still Require an Audit Despite Exemption

Even if your company qualifies as a small company and is not legally required to be audited, there are certain situations where an audit may still be necessary or beneficial:

1. Bank or Investor Requirement

Banks and investors often require audited financial statements before granting loans or investing in your company. Having audited financials can boost credibility and improve access to financing.

2. Tender Applications or Government Contracts

Many government agencies or large corporations require audited statements when companies apply for public tenders or large contracts. This helps them assess the financial stability of their vendors.

3. Grant Applications

Some government grants (e.g., under Enterprise Singapore) may require audited accounts as part of the eligibility or disbursement process, especially for grants involving larger funding amounts.

4. Voluntary Audit for Corporate Governance

Companies aiming for better internal control, stakeholder trust, or preparation for IPO or acquisition may voluntarily undergo audits.

Types of Businesses That Commonly Need Audits

Certain types of businesses, even if small, are more likely to undergo audits due to the nature of their operations, regulation, or industry expectations. Examples include:

• Non-Profit Organisations / IPCs (Institutions of a Public Character)

• Charities and Societies

• MCST (Management Corporation Strata Title) entities

• Construction companies working on large-scale projects

• Retail or F&B businesses in shopping malls with GTO (Gross Turnover) audits required

• Startups preparing for Series A fundraising

Penalties for Non-Compliance

If a company that is required to be audited fails to appoint an auditor or submit audited financial statements, it may face:

• Penalties from ACRA

• Enforcement actions under the Companies Act

• Legal liability for directors for failing to discharge their duties

• Inability to renew or submit certain licenses or grant applications

ACRA conducts routine compliance checks and may issue summons or financial penalties for non-compliance.

The Role of an Audit Firm in Singapore

An audit firm provides more than just checking the numbers. Professional audit firms offer the following services:

• Independent verification of financial statements

• Evaluation of internal controls and financial risks

• Recommendations for improving accounting practices

• Assistance with audit planning and compliance with Singapore standards

• Support for due diligence during mergers, acquisitions, or fundraising

Choosing a licensed Public Accounting Firm ensures the audit is done in accordance with the Singapore Standards on Auditing (SSA) and Singapore Companies Act.

Conclusion: Should You Engage an Auditor?

Even if your company is exempt from audit requirements, engaging an auditor can be a strategic move. It improves transparency, builds credibility with external stakeholders, and can help your business scale sustainably. For companies that exceed the small company threshold, understanding your statutory obligations is non-negotiable.

If you’re unsure whether your company needs to be audited or how to prepare for an audit, it’s best to consult with a professional audit firm in Singapore. A qualified auditor can provide clarity and ensure compliance with all regulatory requirements.