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Audit Exemption for Singapore Small Companies Concept – Introduced by ACRA
The Accounting and Regulatory Authority (ACRA) introduced a new concept back in July, 2015, known as the small company concept. That move followed the new reform of the Companies Act which introduced the exemption of audits for small companies.
What is the “Small Company” Concept?
Under this new concept, companies that qualify as small companies would get to reduce their regulatory costs since they would have fewer audit requirements to comply with. Although exempted from audits, the qualifying companies would still need to provide unaudited reports for assessment.
Among the exemptions included are:
- Profit and loss accounts, consolidated accounts and balance sheets no longer need to be audited by an approved auditor. An approved auditor would be one that has been certified and licensed by the Institute of Singapore Chartered Accountants (ISCA)
- Members of the company no longer need to be provided with copies of the auditor’s report
- Copies of the auditor’s report are no longer needed at the Annual General Meetings
Who Qualifies as a “Small Company”?
Companies would need to fulfil any two of the requirements listed below for immediate past two consecutive financial years to be deemed a small company:
- Total revenue of the company is no more than $10 million
- Total assets of the company are no more than $10 million
- Total number of employees at the company are no more than 50
Additional requirements include:
- The company must be incorporated in Singapore
Before the change took place, if a company wanted to qualify for exemptions, it had to reach a maximum threshold of $5 million. With the new upward adjustment by ACRA, at least 25,000 SMEs will be able to qualify for the audit exemption. Nevertheless, despite these audit exemptions, companies will still be required to prepare the following:
- Unaudited financial statements
- Maintain proper accounting records
- Empower shareholders who have a minimum of 5% voting rights to require companies to prepare audited accounts
Properly maintained accounting records are essential to a company, especially when ACRA has been not to conduct surprise checks periodically. Companies who may be unfortunately embroiled in legal issues may require an auditor to be appointed, which is why it is important that these accounting records be up to date.
Companies would also need to ensure that their employees are equipped with the knowledge and experience to ensure that the company’s profit and loss accounts and balance sheets are prepared in accordance with the requirements set force by SFRS.
As of 1st July 2015, when the changes came into effect, it is required that private companies meet the above criteria. This applies for the first of second half of a company’s fiscal year which commences either on or after the 1st of July.
With the small company concept, Singapore’s company practices are now in line with other countries such as Australia and the United Kingdom. ACRA has also introduced and implemented the new XBRL standards across the board as of March 2014. The XBRL is a business reporting standard that is now used internationally.
Singapore is set to be the new business destination for foreign investors and entrepreneurs, and the business climate in the country has certainly played a role in contributing to this reputation. Singapore is making the right moves towards making its business environment a more similar one to that of the international markets, while at the same time maintaining its attractive tax regime and pro-business policies.