Do I need an auditor for my business?
4 minute read
Company audits are critical elements in the process of ensuring that your company’s financial statements are just and accurate. In relation to that, the Companies Act (CA) has outlined requirements that companies need to meet for a proper and thorough auditing process, including the appointment of auditors as well as the roster of those organizations exempt from these auditing requirements.
Singapore’s business landscape
Singapore has consistently stayed on top of World Bank’s “ease of doing business” rankings for the past decade. The Singapore economy has been consistently recognized as one of the most stable across the globe.
With massive government revenues, zero foreign debt, and a consistently positive surplus, there’s no question why Singapore ranks second among 43 Asia-Pacific countries and has earned an overall economic freedom score well above the regional and global averages.
ACRA: Singapore’s regulator of business entities
Other than the ones mentioned above, Singapore likewise owes the success of its highly developed free-market economy largely to its corruption-free business environment, a transparent legal framework, and prudent monetary and fiscal policies.
Add that to the fact that Singapore authorities regularly update all relevant policies on auditing exemption with Singapore registered companies. These auditing regulations and exemptions, such as the “small company concept” promoted by Singapore’s Accounting and Corporate Regulatory Authority (ACRA), has likewise contributed to the country becoming more appealing for local and foreign entrepreneurs to incorporate new companies.
ACRA is Singapore’s regulator of business entities, corporate service providers, and public accountants in the country. The regulatory authority is also the main facilitator for the nation-state’s development of business entities as well as the public accountancy profession.
The “small company” concept
Made effective last 1 July 2015, the concept of “small company” was introduced by the Companies Act in Singapore basically to exempt private companies that meet an officially outlined criteria from the requirement of a yearly audit. The small company concept, which basically helps companies reduce operation and compliance costs, applies to both newly registered as well as existing private limited companies in Singapore.
The said amendment in The Companies Act stipulates that for a company to be considered a “small company” it must fulfill at least two out of the following three conditions:
Group companies as small companies
Aside from private companies, group companies can also take advantage of and avail of the said audit exemption. Group companies refer to holding companies and their subsidiaries that together form a group due to a common source of control.
A group company can also take advantage and avail of the said audit exemption with the condition that the holding and all subsidiary companies qualify as a small group based on the following set of criteria:
In short, the holding company and all the individual subsidiary companies must fulfill the eligibility criteria of a small company as a group for them to qualify for the exemption for annual audit.
Disqualification from the audit exemption
Once legally recognized as a “small company,” a company or group company will continue to enjoy the audit exemption benefit unless it ceases to operate as a private company in the financial year or it no longer satisfies the qualifying conditions for a “small company” for the next 2 (two) consecutive financial years immediately before the current financial year.
To check whether your company complies with these stipulated conditions and be able to avail of this audit exemption, it is highly recommended that you engage the services of a reliable corporate services provider. Talk to us today and we’d be happy to walk you through the process for a better understanding.