Voluntary and Mandatory Audit in Singapore

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.

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 annual revenue should not exceed S$10 million

·         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.