In July 2015, The Accounting and Corporate Regulatory Authority (ACRA) in Singapore established a new concept called the small company concept. Soon afterwards, a new Companies Act reform was introduced to offer audit exemptions for these small companies.
What is the Small Company Concept?
According to the small company concept, qualifying organizations can enjoy reduced regulatory costs due to fewer audit requirements to comply to. Despite the audit exemption, these companies will still have to submit unaudited reports.
Below are some of the exemptions small companies can enjoy:
- Small companies no longer need to get their balance sheets, consolidated accounts and profit and loss accounts audited by an approved auditor. (Approved auditors are auditors with the Institute of Singapore Chartered Accountants (ISCA) license and certification.)
- Auditor’s report copies do not have to be distributed to the company members.
- Auditor’s report copies do not have to be given out at the company’s Annual General Meeting.
What makes a Company Eligible as a “Small Company”?
To qualify as a small company and benefits from such audit exemptions, an organization must fulfil any 2 of the following requirements for the past 2 immediate consecutive fiscal years:
- Have total revenue of equal to or less than $10 million
- Have total assets worth equal to or less than $10 million
- Have no more than 50 employees
In addition to meeting 2 of the aforementioned requirements, being an incorporated company in Singapore is the upmost requirement.
Statutory Obligations of a Small Company
Before the reform, organizations must reach a $5 million threshold in order to qualify for such exemptions. However, the upward adjustment by ACRA qualifies a minimum of 25,000 SMEs for the audit exemption.
Despite being qualified for such exemptions, firms must still ensure the following:
- Prepare financial statements
- Maintain accurate accounting records
- Inform shareholders with 5% voting rights or more to prepare audited accounts
Small companies are expected to maintain proper accounting records. Accounting records need to be up-to-date as ACRA may conduct uninformed checks. Companies must ensure that their employees have adequate experience and knowledge in preparing balance sheets and profit and loss accounts in accordance with SFRS requirements. For companies with legal issues, an auditor must be appointed.
Since 1 July 2015, thanks to the small company concept, company practices in Singapore are now on par with other nations such as the United Kingdom and Australia. ACRA has also introduced the XBRL, an international business reporting standard, in 2014.
With all of these updates, Singapore has secured its place as one of the most lucrative destinations for foreign entrepreneurs and investors. Without doubt, Singapore is making huge strides towards dominating international markets. In addition, the nation is maintaining pro-business policies and attractive tax practices.
Timcole is here to help.
Not sure if your company is eligible for audit exemption? Contact us for a free consultation.