Audit Exemption for Companies in Singapore 2021
In this article, you will get complete information about the criteria to get audit exemption for your company in Singapore.
Extent of Exemption
Companies should remember that even if they meet the requirements of the Singapore Companies Act to get audit exemption, they will still be required to prepare financial statements to ensure compliance with the Companies Act and other tax rules and regulations.
The concept of audit exemption was introduced to minimize the burden on small companies and move towards a risk-based model. As a result, the exemption from audit requirements was formed after amending the Companies Act.
Eligibility Criteria for Audit Exemption
The new audit exemption rules became applicable for Singapore companies incorporated after 1st July 2015 or the company that has a financial year starting later than 1st July 2015. Following are the companies that get audit exemption in Singapore:
1. The small company registered as a private company during the financial year.
2. For the last two years, the company meets at least two of these conditions:
- The total annual turnover of the company is less than S$10 million.
- Total assets of the company are less than S$10 million
- The company has less than 50 employees
On the other hand, if the company belongs to a group of companies, then:
3. The company must meet the requirements of being a small company in Singapore.
4. The entire group of companies should be considered a small group company.
In terms of the law, a small group company meets two of the three conditions of a small company, as stated above. If these eligibility criteria are met, the company will qualify for audit exemption.
It is quite understandable that remembering all of these conditions and finding out that you meet the criteria or not can be very challenging for people.
In such conditions, companies should get the services of professional accounting and audit firms in Singapore because such firms have professionals who have complete knowledge about the Singapore audit rules and processes.
FAQs About Audit Exemption in Singapore
Other than the eligibility criteria discussed above, there are some other important factors about audit exemption that you should know about. These are:
1. Applying for Audit Exemption
Many companies in Singapore assume that they need to apply for audit exemption. However, there is no need for such an application. As long as a company fulfills the criteria, it will get audit exempt automatically.
2. The Impact of Audit Exemption on Tax Evasion
It is important to note that audit exemption does not mean accounting exemption. As a result, there is no way that audit exemption might make tax evasion easier.
All companies are recommended to hire the professional services of accounting firms to maintain proper financial statements and records.
The financial accounts must comply with the requirements of the Singapore Financial Reporting Standards (SFRS).
3. ACRA Audits
In Singapore, ACRA holds the legal power to ask the companies to produce auditing reports of their financial accounts for a thorough review, even if the company is eligible for audit exemption.
Such kind of audit is only performed when ACRA has a reasonable belief that the companies are engaging in some kind of tax evasion or unfair and illegal practices.
Moreover, the IRAS also has the responsibility of performing random checks on small companies in Singapore by analyzing the tax returns and performing audits of the submitted accounts.
In case of financial consistencies in the audit-exempt companies, IRAS can take large-scale legal action against the company and company directors.
4. Filing Financial Statements
If your company is audit exempt, you still need to file financial statements. In fact, filing statements with ACRA is one of the most important duties of the company directors, which is not affected by audit exemption.
In a Nutshell
By keeping these important factors in mind, small companies should have no issue in determining whether they can get tax exemption or not. Moreover, companies also choose to get help from the audit firms in Singapore to get through this process easily.
For more information, feel free to get in touch with us.