Most Singapore private companies do not need their financial statements audited. The exemption comes from the small company concept, which replaced the old exempt private company test for financial years beginning on or after 1 July 2015.
The change that mattered was not just the thresholds. Under the old test, a single corporate shareholder disqualified a company. Under the small company test, corporate shareholders are irrelevant.
The Small Company Test
A company qualifies as a small company for a financial year if:
- it is a private company in that financial year; and
- it meets at least 2 of the following 3 criteria in each of the immediate past two consecutive financial years:
| Criterion | Threshold |
|---|---|
| Total annual revenue | S$10 million or less |
| Total assets | S$10 million or less |
| Number of employees | 50 or fewer |
Two of three, not all three. A company with S$14 million of revenue still qualifies if its total assets and headcount are both under the thresholds.
Groups: The Company and the Group Must Both Qualify
This is where the exemption is most often assumed rather than checked. Where a company belongs to a group, two separate tests must both be satisfied:
- the company itself must qualify as a small company; and
- the whole group must qualify as a small group.
A group qualifies as a small group where it meets at least 2 of the same 3 criteria on a consolidated basis, in each of the immediate past two consecutive financial years.
Every entity in the group counts, including foreign ones. A small Singapore subsidiary of a large overseas parent will fail the small group test and must be audited, however modest its own figures. Where the parent does not prepare consolidated financial statements, the test is applied by aggregating the total assets and revenue of all group members.
Shareholders Can Require an Audit Anyway
The exemption is not absolute. Members holding at least 5% of the total number of issued shares can require the company to have its accounts audited, whether or not it qualifies as a small company.
This is worth knowing on both sides. A minority investor holding 5% or more has a statutory route to an audit without needing the board’s agreement, and a company planning to drop its audit should check its register before assuming the saving is available.
Keeping and Losing the Status
Once a company qualifies, it stays qualified in later financial years until it is disqualified. A company is disqualified if:
- it ceases to be a private company at any time during a financial year; or
- it fails to meet at least 2 of the 3 criteria for the immediate past two consecutive financial years.
A small group likewise remains small until it fails the two-of-three test on a consolidated basis for the immediate past two consecutive financial years.
Because both tests look back two years, a company that grows past the thresholds does not lose the exemption immediately, and one that shrinks below them does not gain it immediately.
What Audit Exemption Does Not Remove
Audit exemption is narrow. It removes the audit, and nothing else:
- Financial statements must still be prepared, in accordance with the applicable accounting standards. Only a dormant relevant company meeting the substantial assets test is exempt from preparing them at all. See our dormant company guide.
- The annual return must still be filed with ACRA.
- Filing obligations are unaffected by small company status. Whether financial statements must be filed, and in what format, turns on the company’s own circumstances. See annual return and XBRL.
- Tax filing is unaffected. IRAS obligations are separate from the Companies Act position.
Frequently Asked Questions
This is a general guide. Whether your company and its group qualify depends on figures that need checking against the last two financial years, so confirm the position with your auditor or adviser before deciding not to audit.