Audit Exemption – Does Your Company Make the Cut? (Part 1 of 2)

This article illustrates the applicability of the “small company concept” for audit exemption for Singapore-incorporated companies which are not part of a group.

 

The “small company concept” for audit exemption became applicable 10 years ago in 2015. Contrary to the previous concept, a company no longer needs to be an exempt private company (“EPC”) in order to qualify for audit exemption. EPC is a private company which has less than 20 shareholders (individuals) and with no corporate shareholders.

 

A private company which has corporate shareholders can be exempted from audit if Quantitative Criteria are met.

 

Single Company

 

According to the “small company concept”, a company can be exempted from audit if it is small. A company is considered small if:

 

1. it is a private company during the financial year; and

   
   

2. Quantitative Criteria: for the immediate past 2 consecutive financial years, at least 2 of the following 3 criteria are met:

   
   

   - Annual revenue ≤ S$10 million

   - Total assets ≤ S$10 million

   - Number of full-time employees as at the end of the financial year ≤ 50

 

If the current financial year is FY2X23, the immediate past 2 consecutive financial years are FY2X21 and FY2X22.

 

Quantitative Criteria – Continuing Qualification

 

Where a company has qualified as a small company, it continues to be a small company until it is disqualified. A company is disqualified and not considered small if:

 

a)     It ceases to be a private company at any time during a financial year; or

b)     it fails to meet the Quantitative Criteria for the immediate past 2 consecutive financial years.

 

Existing Company (Example 1):

Existing Company (Example 2):

New Company (Incorporated in FY2X21):

A new company qualifies as a “small company” if it is a private company and meets the Quantitative Criteria in its 1st or 2nd financial year after incorporation. If the new company did not qualify in the 1st financial year, it will still get a chance to qualify in its 2nd financial year.

Company which is part of a group (e.g. subsidiary)

 

For the company to qualify as a small company, the group it belongs to need to qualify as a small group. This is even if the parent company and/ or any other group entities are foreign-incorporated companies.

 

We would discuss in our next article how a group is considered a small group.

 

Annual Returns – Preparing/ Filing of Financial Statements

 

Audit exemption does not exempt a company from preparing its financial statements (audited or unaudited). When filing the annual returns, the following items need to be declared:

 

a)     Director(s) who signed the statement by director(s)

b)     accounting standards used to prepare financial statements

c)      nature of financial statements (i.e. Company or group level)

 

Whether a company needs to file its financial statements in its annual returns depends on whether the company is a solvent exempt private company.

 

UFS - Unaudited Financial Statements

 

In today’s cost-conscious environment, audit exemptions provide businesses with the opportunity to save on compliance costs while reallocating resources to tackle business challenges. Still, unaudited financial statements must be prepared diligently.

 

Our accounting arm assists our clients in preparing unaudited financial statements that are not only in line with financial reporting standards, but with notes and disclosures that are:

 

✅ Concise – Easy to read and understand, with no confusing jargon.

✅ Accurate – Reflects the clients’ true financial position and performance.

✅ Complete – Covers all key areas under assets, liabilities, profit or loss and equity.

✅ Comparable – Prepared consistently each year for trends to be easily observed and tracked.

✅ Timely – Ready quickly enough to be useful for decision-making.

✅ Relevant – Focused on what really matters for business owners and readers.

 

With these objectives in mind, unaudited financial statements prepared by us are usually more than just a compliance document — they are reliable tool for managing your business. Contact us today for a fee quotation of our UFS services.

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References:

ACRA - More Details on Small Company Concept for Audit Exemption