An audit is an independent examination of a company's financial records, transactions, and operations to ensure accuracy, compliance with laws and regulations, and adherence to accepted accounting principles. The requirement for audits in Singapore is governed by the Companies Act. While the regulatory framework is relatively business-friendly, understanding when and why a company must undergo an audit is crucial for compliance.
Audit Requirement for Companies
All companies incorporated in Singapore are required to prepare audited financial statements unless exempted. These audits provide an independent evaluation of the company’s financial health and ensure transparency and accuracy in financial reporting. However, certain small companies are exempt from mandatory audits under the Companies (Amendment) Act 2014 if they meet specific criteria.
Criteria for Audit Exemption
A company can qualify for an audit exemption if it satisfies at least two of the following criteria for two consecutive years:
- Total Annual Revenue: Less than S$10 million.
- Total Assets: Less than S$10 million.
- Number of Employees: Fewer than 50.
Additionally, companies that are subsidiaries of a parent company that is required to have an audit or those listed on the Singapore Exchange (SGX) must still undergo an audit.
Audit Requirements for Public Companies
Public companies, including those listed on the Singapore Exchange, are always required to have their financial statements audited, regardless of size. This ensures investor confidence and aligns with global corporate governance standards.
Role of an Auditor
An auditor’s role is to review a company’s financial records, transactions, and operations. They ensure that the company adheres to the Singapore Financial Reporting Standards (SFRS). If an auditor identifies discrepancies or issues, they must report these findings in their audit opinion.
Conclusion
While many small companies may be exempt from audits, businesses that meet certain thresholds or are subject to other regulations must comply with audit requirements. Ensuring proper financial audits not only keeps a company compliant with the law but also enhances credibility and builds trust with stakeholders.
Also Read: Documents Required in Private Limited Company Formation in Singapore
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