Running a business in Singapore involves understanding your reporting duties. One important area is the annual audit. While many companies must complete a yearly audit, some may qualify for exemption. If your business meets specific conditions, you can save time and costs by avoiding a full statutory audit. This guide walks through the main requirements for audit exemption Singapore companies need to follow.
Singapore’s rules aim to reduce the regulatory load for smaller businesses. However, the exemption does not mean ignoring accounting rules. It simply allows eligible companies to prepare unaudited financial statements while staying compliant with the legal and financial framework set by regulatory authorities.
What Is Audit Exemption?
An audit exemption means that a company does not need to appoint a public accountant to review its financial statements. The exemption applies only if certain conditions are met under Singapore’s Companies Act.
To qualify, a company must meet the definition of a “small company” or be part of a “small group.” These terms have precise meanings and are measured against clear benchmarks, ensuring fairness and transparency in financial reporting.
Companies that enjoy audit exemption still need to prepare financial statements, submit annual returns, and maintain good records. Some may also conduct an internal audit for internal review or strategic planning, but that is different from a statutory audit.
Why It Matters?
Avoiding a full audit frees up resources and reduces costs. It allows small companies to focus on growth and compliance without the pressure of a formal audit. It also benefits newly formed companies that may not have much revenue or assets in the first few years.
At the same time, audit exemption is not automatic. You must check your company’s size, group structure, and financial activity against set limits. Let’s explore these in detail.
1. Private Company Status
The first and most basic requirement is that your company must be private. Only private companies limited by shares can apply for audit exemption. Public companies and those with corporate shareholders that have complex ownership structures may not qualify.
A private company:
- Has fewer than 50 shareholders
- Does not offer shares to the public
- Operates with a clear ownership structure
This rule ensures that only smaller, privately held businesses can skip audits. If your business structure changes, you may lose the exemption. Staying aware of changes in shareholder count is essential for maintaining this status.
2. Qualifying as a Small Company
The core test for audit exemption relies on whether your company qualifies as a “small company.” This involves checking three financial indicators. You must meet at least two of the following criteria for the last two financial years:
- Total annual revenue not more than S$10 million
- Total assets not more than S$10 million
- Total number of employees not more than 50
If your company crosses any two of these benchmarks, it must undergo a statutory audit.
Here’s a summary:
| Criteria | Threshold Value | Applies Over |
| Annual Revenue | ≤ S$10 million | Last 2 financial years |
| Total Assets | ≤ S$10 million | Last 2 financial years |
| Number of Employees | ≤ 50 | Last 2 financial years |
This test helps regulators separate small businesses from larger ones that should undergo full audits.
3. New Companies and First-Time Filers
If your company has operated for fewer than two years, it may still qualify for audit exemption—even if you lack two years of financial history. In this case, you check if your company meets the two-out-of-three rule based on available data.
Startups often benefit from this rule. It allows them to focus on operations and building systems rather than preparing for a formal audit right away. It also supports innovation and entrepreneurial risk by easing early compliance burdens.
However, if your early revenue or asset size grows quickly, you must prepare to shift to audited statements in future years.
4. Being Part of a Small Group
If your company is part of a group of related companies, you must apply the group test. A group qualifies as “small” if the entire group—when considered together—meets at least two of the same three conditions:
- Consolidated revenue ≤ S$10 million
- Consolidated assets ≤ S$10 million
- Employees ≤ 50 (on a consolidated basis)
This prevents large groups from forming many small units to bypass audits. It also ensures that the exemption is used only by groups that operate on a truly small scale.
Groups must use consolidated financial figures and headcounts for this test.
5. Not Engaging in Regulated Activities
Some businesses are subject to other regulatory bodies. Financial services firms, public interest entities, or charities may not qualify for audit exemption even if they meet the size rules.
These sectors often involve public money or client funds, so stricter oversight applies. If your company needs a licence or must report to agencies such as MAS, ACRA, or IRAS for regulated activity, you may need to undergo audits regardless of size.
If unsure, review your licensing conditions and seek legal advice.
6. Keeping Proper Financial Records
Even without an external audit, companies must prepare financial statements that follow the Singapore Financial Reporting Standards (SFRS). These records must reflect a true and fair view of the company’s finances.
Maintaining proper documentation ensures readiness in case regulators request an inspection. It also helps internal management monitor growth, risk, and budget needs. Many companies conduct an internal audit to check for control gaps and improve efficiency.
Neglecting records can lead to penalties, errors, or future audit issues. Exemption from audit does not remove the duty to stay organised. Strong internal practices still matter.
7. Directors’ Duties Remain Unchanged
Audit exemption does not reduce a director’s responsibilities. Directors must still ensure that:
- Financial statements are complete and accurate
- Annual filings with ACRA occur on time
- Tax returns are submitted to IRAS based on the correct data
Errors or omissions may lead to personal liability. That’s why many directors support internal audit efforts, even without mandatory external reviews.
The board remains accountable for any false statements or delays in reporting. Holding regular board reviews can help flag issues early.
Benefits of Audit Exemption (When Properly Managed)
While exemption offers flexibility, it brings advantages only when the company maintains sound systems. With proper bookkeeping and financial controls, you gain the following benefits:
- Reduced cost and effort on compliance tasks
- Faster turnaround for year-end financial work
- More time for internal process improvements
- Fewer external demands on staff and resources
- Greater agility to shift priorities or expand teams
Used wisely, audit exemption allows you to build systems at your own pace while staying fully compliant.
What Happens If You No Longer Qualify?
Audit exemption is not permanent. If your company crosses the size threshold in any two out of three criteria for two straight years, you lose the exemption and must appoint an auditor.
Likewise, if your company structure changes or joins a larger group, you may need to reassess. Annual reviews help ensure that your company prepares for changes in time.
Missing an audit deadline after losing exemption may result in regulatory action. Planning for transition avoids disruption.
Internal Audit vs. Statutory Audit
Some companies use internal audit even when exempt from external audits. These reviews support planning, risk management, and better use of resources.
Here’s a quick comparison:
| Feature | Statutory Audit | Internal Audit |
| Required by Law | Yes (if not exempt) | No (optional) |
| Focus Area | Financial reporting | Risk, control, performance |
| Conducted By | Independent auditor | In-house or third-party team |
| Frequency | Annual | Flexible (quarterly/yearly) |
| Benefits | Legal compliance | Strategic insight |
Both types of audits serve a purpose. Internal checks help prepare for growth, financing, or exit planning.
Final Thoughts
The audit exemption Singapore rules offer small businesses relief from mandatory audits, allowing more focus on daily operations and growth. By checking size and structure carefully, companies can decide whether they qualify.
Maintaining solid financial systems remains essential. Even without external review, businesses benefit from regular tracking, reporting, and planning. Many choose to run an internal audit to ensure they meet goals and follow policies.
For businesses that qualify, the audit exemption saves resources and builds confidence in internal controls. For those approaching the limits, early preparation ensures a smooth transition if audits become required later.
