The Singapore companies act has made it mandatory for a
registered company to get their financial accounts audited as and when
required. Carrying out auditing for a company involves evaluating a person, system,
process or product of an organization. Auditing is independently and
systematically scrutinizing statements, records, data, and performance of an
organization.
Singapore incorporated company owner may have the query when
to appoint an auditor? If a company is not exempted from audits needs is
required to appoint an auditor within 3 month of company formation in Singapore. Now, the question pops up, which companies are exempted to carry
auditing of their financial transactions in Singapore? The Singapore companies
Act exempts those companies from carrying out audit
· Who have less than 20 shareholders unless the
company is private limited
·
If there is no corporate shareholder
·
If the annual turnover is not exceeding S$5
million and
·
If it is a dormant company.
Dormant companies are those who have not started any business since their inception.
Dormant companies are those who have not started any business since their inception.
Singapore is lenient enough and has exempted many private
companies to undergo auditing. The Accounting and Corporate Regulatory
Authority (ACRA) of Singapore and the Ministry of Finance (MOF) of Singapore
have proposed changes in the companies act in June 2011. The two governing
bodies have recommended practicing small company system by differentiating
statutory financial reporting requirement for private companies. They have
proposed three points; out of which if two are applicable a company is exempted
of practicing audit:
·
Total gross assets should not exceed S$10
million
·
Total number of employees should not exceed 50
According to ACRA, around 70% of private companies are
exempted of audit in Singapore. Some small companies still practice auditing
for their financial transaction for the sole purpose of obtaining credit
facilities externally.
Audited reports are used by potential stakeholders to
determine the financial status of the company useful in providing assessment
for loan or credit facilities to the company.
If a company chooses voluntary audit it positively signals
about its authenticity and genuineness. A lender takes in account the
trustworthiness of the company for auditing its financial transactions
voluntarily.
Companies experience an improvement in their credit ratings if
they continue with voluntary auditing in consecutive years. Those companies are
not affected by the changes happened within the organizations such as change in
size or change in performance. Those companies who are neither imposed auditing
nor opted for voluntary auditing suffer low credit ratings.
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