November 28, 2020

Facts About Statutory Audit of Companies in Singapore

Owing to its vibrant economic climate, political stability, tax incentives, low corruption rate, and seamless regulatory system, Singapore is the chosen business destination for foreign investors across the world. In fact, today it holds the 5th position in attracting the most FDI inflows in the world.

As a rapidly growing global business hub, the island nation has audit and compliance regulations that certain businesses are mandated to follow. However, the audit and compliance procedures in Singapore are pretty straightforward and much less cumbersome, paving an easy and hassle-free way to run a business. No wonder, the country has been topping the World Bank’s Ease of Doing Business index in a row for many years.

The main legislation regulating the issues of compliance in the country is Singapore’s Companies Act. The businesses operating here must adhere to the annual filing requirements laid out by the Accounting and Corporate Regulatory Agency (ACRA), along with the Inland Revenue of Singapore (IRAS).

What is a Statutory Audit?

A statutory audit is an external audit performed by an auditor to examine and evaluate the financial records of a business impartially. Such an audit is required by the laws and ACRA is the authority that governs the laws and regulations pertaining to statutory audits for companies based in Singapore.

After the evaluation is complete, the auditor puts forth their unbiased conclusions in the audited financial report, which includes financial statements such as income statement, balance sheet, statement of cash flows, and statement of equity changes, among others. The prime focus of an auditor is to verify and ascertain the authenticity and accuracy of the reported information.

Appointing a Company Auditor

All companies are legally obliged to appoint an auditor within at least 3 months of company incorporation in Singapore. In the event of a resignation or removal of an auditor, the company must appoint a new auditor. Should the directors fail to comply with this requirement, the ACRA may directly appoint a new auditor for the company.

Which Companies are Required to Be Audited?

The Singapore Companies Act mandates private limited companies to have a qualified public accountant audit their financial statements at least once a year.

Although Singapore boasts of a strict but fair regulatory system and relatively seamless and fast procedures, foreign investors could use the services of registered local advisors to navigate the compliance issues and stay on the right side of regulatory laws.

Which Companies Are Exempted from Audits?

There are some companies in Singapore that do not have to conduct statutory audits as stipulated by the Companies Act. These companies may be:

Small business: A company that falls within the category of a ‚Äúsmall company‚ÄĚ must meet at least two of the following three criteria defined by the ACRA for small companies.

  • the total annual revenue of up to S$10 million
  • the total asset value of up to S$10 million or less
  • a maximum of 50 employees or fewer

Small business groups: Besides fulfilling the above criteria, the subsidiary of a company or a sister concern of a bigger enterprise operating on a consolidated basis for the past two financial years falls under this category.

Dormant companies: Businesses that do not have any accounting transactions recorded either from the time they were established or during the previous financial year are categorized as dormant companies.

However, there is an exception to this rule, which applies if the Registrar finds a company to be non-compliant with laws relating to the accounts keeping or furnishing of financial statements at its annual general meeting (AGM).

In such circumstances, the ACRA may require the company to submit its audited financial records and auditor’s report irrespective of whether the company is eligible for audit exemption.

What is also worth noting is that even if a company is not obliged to undergo a statutory audit, they are still needed to prepare and file their unaudited annual financial statements. This record is essential while calculating and filing the corporate tax returns.

The only difference between an auditable company and one that is exempted from audits is that the latter is not required to appoint an auditor within 3 months of incorporation and their accounts do not need to go through an official auditing process.

What is an Annual General Meeting?

An annual general meeting (AGM) is compulsory for a Singapore-based company, but it can be held in any corner of the world. AGMs must be held at least once a year; within 15 months from the previous AGM; or six months from the financial year ending date.

AGMs generally involve the following discussions:

Approval of the audit statements and reports

  • Re-election of directors, if needed
  • Re-appointing of auditors
  • Declaration of dividends
  • Other business transactions

Consequences of Non-Compliance

In case a company fails to meet the regulations laid out by ACRA or is found to have been in breach of the statutory audit laws, it is liable to undergo penalties and/or punishments as specified by Singapore’s company laws. Such breaches may include:

  • the failure to appoint an auditor within at least 3 months of the company‚Äôs incorporation
  • the submission of wrong, misleading, or fraudulent information

These violations are deemed punishable and may incur penalties.

How to Do Statutory Audit of Companies

Setting up a company and making sure its operations are compliant with the regulations laid out by Singapore’s Companies Act can be a tricky affair for many businesses. Failing which, a company faces the risk of serious consequences.

Working with a reputable accounting firm like Bestar can help you steer clear of misstatements, misrepresentations, errors, or discrepancies to ensure that your company fully complies with the legal and regulatory requirements in Singapore.

From preparing ‚Äėaudit ready‚Äô documentation in keeping with the Singapore Financial Reporting Standards (SFRS) to maintaining, tracking, and safekeeping your company‚Äôs financial data and records, we can assist you in effectively meeting your statutory audit obligations.

Besides helping you with a statutory audit in Singapore, our team at Bestar offers comprehensive support when it comes to launching a new business in Singapore and get you started on the right foot with incorporation, accounting, and administration services.