Who Needs a Statutory Audit in Singapore? A Guide for SMEs and Companies

Running a business in Singapore comes with numerous compliance obligations. One key requirement is the statutory audit, which applies to companies above a certain threshold. However, not all companies are required to undergo this process. This article aims to demystify who needs a statutory audit in Singapore, focusing on audit exemption criteria, group consolidation rules, and implications for Small and Medium Enterprises (SMEs).

Whether you are a business owner, director, or financial controller, understanding these requirements is essential for legal compliance and sound financial governance.

What Is a Statutory Audit?

A statutory audit is a legally mandated review of a company’s financial statements by an independent auditor. The audit ensures the accounts give a true and fair view of the financial health of the company and comply with the Singapore Financial Reporting Standards (SFRS).

In Singapore, statutory audits are governed by the Companies Act 1967, enforced by the Accounting and Corporate Regulatory Authority (ACRA). For many businesses, the audit obligation depends on whether they meet the audit exemption threshold.

Audit Exemption in Singapore: The Small Company Criteria

The audit exemption was introduced to reduce the regulatory burden on smaller companies. To qualify for audit exemption, a company must meet the criteria of a small company.

A company qualifies as a small company if it is a private company and meets at least two out of the following three criteria for the immediate past two financial years:

1. Total annual revenue ≤ S$10 million

2. Total assets ≤ S$10 million

3. Number of employees ≤ 50

These criteria must be assessed over two consecutive financial years. If the company fails to meet the threshold in one of those years, it will lose the exemption status in the next cycle.

Group Companies: The Small Group Test

If the company is part of a group (i.e., it owns or is owned by other companies), the entire group must qualify as a small group to enjoy audit exemption.

A group qualifies as a small group if it meets at least two of the three quantitative criteria on a consolidated basis for the immediate past two consecutive financial years:

1. Consolidated revenue ≤ S$10 million

2. Consolidated total assets ≤ S$10 million

3. Consolidated number of employees ≤ 50

This means the ultimate holding company will need to prepare consolidated financial statements, and the combined financial figures of all group entities will be used to determine exemption eligibility.

Who Must Have a Statutory Audit?

Any company that does not meet the audit exemption criteria above is legally required to appoint an auditor and undergo a statutory audit.

This includes:

• Private companies that exceed two out of three thresholds (S$10M in revenue, S$10M in assets, >50 employees)

• Public companies (listed or unlisted)

• Foreign-owned subsidiaries that exceed the small company threshold

• Dormant companies (in some cases, see below)

Special Cases: Dormant Companies

Dormant companies are exempt from preparing audited accounts under certain conditions. A company is considered dormant if it has no accounting transactions during the financial year.

However, to be fully exempt from audit and financial reporting, a dormant company must:

• Not be listed

• Not be a subsidiary of a listed company

• Meet ACRA’s conditions (e.g., not having significant assets or liabilities)

If a dormant company is part of a group that exceeds small group thresholds, it may still be required to file audited accounts.

Statutory Audit Requirements by Entity Type

Here’s a quick reference for who typically needs a statutory audit in Singapore:

Why Do Statutory Audits Matter for Non-Exempt Companies?

If your company is required by law to appoint an auditor, failing to do so can result in penalties, fines, or even prosecution under the Companies Act. But beyond compliance, statutory audits bring added benefits:

• Transparency: Financial statements are verified for accuracy, giving assurance to stakeholders.

• Investor Confidence: Audited statements are often required by banks, investors, and grant agencies.

• Corporate Governance: Internal controls and accounting systems are often reviewed during audits.

• Fraud Detection: Independent audits can uncover irregularities, fraud, or weaknesses in financial processes.

What Happens If You Ignore Audit Requirements?

Failing to conduct a statutory audit when required may lead to:

• Fines imposed by ACRA

• Director disqualification

• Reputational damage

• Complications with tax authorities or during M&A deals

Directors have a fiduciary duty to ensure the company meets all statutory obligations. Ignorance of audit requirements is not a valid defense.

How Should SMEs Prepare for a Statutory Audit?

For SMEs that are approaching or have exceeded the audit threshold, it’s essential to:

1. Track financial metrics proactively (revenue, assets, employee count)

2. Ensure good bookkeeping practices throughout the year

3. Engage a licensed audit firm early to plan the audit timeline

4. Organize supporting documents, contracts, invoices, and ledgers

5. Review internal controls and accounting systems

Proactive audit readiness ensures smoother execution, faster reporting, and fewer compliance risks.

Choosing a Reliable Audit Firm in Singapore

Companies that need statutory audits should only engage audit firms registered with ACRA, such as Public Accounting Corporations (PACs) or Public Accountants.

Factors to consider when choosing an auditor include:

• Audit firm’s license and accreditation

• Experience with your industry

• Service responsiveness and quality

• Transparent pricing

• Ability to meet deadlines

An experienced statutory auditor will not only fulfill compliance but also offer valuable insights into financial processes and improvements.

Conclusion

Statutory audits play a vital role in maintaining financial accountability in Singapore’s corporate ecosystem. While many SMEs qualify for audit exemption, those that cross the statutory threshold must ensure they meet audit obligations under the law.

Understanding whether your company needs a statutory audit—and taking steps to prepare for it—is key to ensuring compliance, safeguarding credibility, and supporting long-term growth. For companies on the threshold, it’s also smart to consult an experienced audit firm to assess your eligibility and plan ahead.

If you need help with statutory audit, visit https://kohlimaudit.sg/services_post/company-statutory-financial-audit-singapore/