For companies operating in Singapore, financial reporting is an important part of maintaining proper corporate governance and complying with regulatory requirements. One term that business owners frequently encounter is statutory audit.
But what exactly is a statutory audit? Does every Singapore company need to appoint an auditor? Are small companies exempt from audit requirements? And what happens when a growing business crosses the audit exemption thresholds?
Understanding these requirements is particularly important for directors, shareholders and finance teams because audit obligations can change as a company grows.
This guide explains what a statutory audit is in Singapore, why companies may be required to undergo one, the current small-company audit exemption criteria, and how businesses can prepare for an audit.
This article is intended as general information and should not be treated as accounting, audit or legal advice.
What Is a Statutory Audit?
A statutory audit is an independent examination of a company’s financial statements where an audit is required under applicable legislation.
In Singapore, the relevant corporate legislation is principally the Companies Act 1967. A statutory audit is performed by an independent auditor who examines the company’s financial statements and supporting information before expressing an audit opinion.
The purpose of the audit is not simply to check whether every transaction is correct.
Instead, the auditor gathers sufficient appropriate audit evidence to form an opinion on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework.
For business owners, this distinction is important.
An audit provides independent assurance over the financial statements, but it does not guarantee that a company has no fraud, errors or financial problems.
Why Are Statutory Audits Important?
Financial statements provide information about the financial position and performance of a company.
They may be used by many parties, including:
- Shareholders
- Directors
- Banks
- Investors
- Suppliers
- Customers
- Government agencies
- Potential acquirers
- Business partners
Because management is responsible for preparing the company’s financial statements, an independent audit can increase confidence in the financial information presented.
This separation between management and the auditor is one of the fundamental concepts behind external auditing.
The company prepares its accounts and financial statements.
The independent auditor examines those financial statements and expresses an opinion based on the audit work performed.
Does Every Singapore Company Need a Statutory Audit?
No.
Singapore provides an audit exemption for qualifying small companies.
Under ACRA’s current framework, a private company can qualify for audit exemption under the small company concept if it meets the applicable requirements.
This means many smaller Singapore private companies do not require a statutory audit.
However, companies should not automatically assume that being incorporated as a private limited company means they are exempt.
The company’s size, corporate structure, historical financial figures and group status may all be relevant.
What Is the Small Company Audit Exemption?
The small company audit exemption applies to financial years beginning on or after 1 July 2015.
According to ACRA’s guidance, a company must first be a private company during the relevant financial year.
It must then meet at least two out of three quantitative criteria for the immediate past two consecutive financial years.
The current criteria are:
1. Annual Revenue of S$10 Million or Less
The company’s total annual revenue must not exceed S$10 million.
Revenue is assessed based on the company’s financial statements prepared according to the applicable accounting standards.
2. Total Assets of S$10 Million or Less
The company’s total assets must not exceed S$10 million.
Again, the assessment is based on the company’s financial statements.
3. 50 Employees or Fewer
The company must have 50 or fewer employees, based on the number of full-time employees at the end of the financial year.
A company generally needs to satisfy at least two of these three criteria for the immediate past two consecutive financial years to qualify under the small-company framework.
An Example of the Small Company Criteria
Consider a Singapore private company with the following financial profile:
Annual revenue: S$8 million
Total assets: S$7 million
Employees: 70
The company satisfies two criteria:
Revenue does not exceed S$10 million.
Total assets do not exceed S$10 million.
Although it has more than 50 employees, it meets two of the three quantitative tests.
Assuming the other requirements are satisfied, it may therefore qualify as a small company for audit exemption.
Now consider another company:
Annual revenue: S$15 million
Total assets: S$12 million
Employees: 30
This company satisfies only the employee criterion.
It exceeds both the revenue and total asset thresholds.
Therefore, it would not satisfy the two-out-of-three quantitative test.
This demonstrates why companies should review all three criteria rather than focusing only on revenue.
What About Newly Incorporated Companies?
The rules work somewhat differently for newly incorporated companies that have existed for less than two years.
According to ACRA, a newly incorporated company can qualify for audit exemption if it is a private company and satisfies at least two of the three quantitative criteria in the current financial year.
For its second financial year, if it did not qualify during its first year, the requirements can be assessed again for that second year.
This is particularly relevant for startups.
A rapidly growing startup could begin operations within the small-company thresholds but expand significantly within a relatively short period.
Its audit position should therefore be reviewed as part of its annual financial reporting process.
What If the Company Belongs to a Group?
This is where determining audit exemption can become more complicated.
A company should not assess its position purely on a standalone basis if it belongs to a group.
Under the current framework described by ACRA, where a Singapore company or subsidiary is part of a group, both the company and the entire group must meet the applicable small-company/small-group conditions.
The group must satisfy at least two of the following criteria on a consolidated basis for the immediate past two consecutive financial years:
- Consolidated annual revenue of S$10 million or less
- Consolidated total assets of S$10 million or less
- 50 employees or fewer
ACRA also states that whether an entity is part of a group is determined in accordance with the applicable accounting standards.
This can be particularly relevant for Singapore subsidiaries of overseas groups.
A Singapore subsidiary may itself be relatively small, but the size of the wider group can affect whether the audit exemption is available.
Companies with complex ownership structures should therefore determine their audit obligations carefully.
Can a Company With Corporate Shareholders Be Audit Exempt?
Yes.
A common misconception is that a company automatically requires an audit because one of its shareholders is another corporation.
That is not necessarily the case.
ACRA specifically states that companies with corporate shareholders can qualify for the small-company audit exemption. A company does not have to be an exempt private company, or EPC, to qualify for this exemption.
However, where corporate ownership means the company forms part of a group, the group-related requirements must also be considered.
What Is a Dormant Company?
Dormant companies can be subject to separate exemptions.
Broadly, a company is considered dormant when it has no significant accounting transactions during the relevant financial year.
Under section 205B of the Companies Act, dormant companies may qualify for exemption from audit requirements.
There are also circumstances where a dormant relevant company can be exempt from preparing and filing financial statements.
For example, ACRA explains that certain dormant relevant companies may qualify for financial statement preparation and filing exemptions where conditions are met, including a substantial-assets test and requirements relating to listed-company status.
It is therefore important to distinguish between:
audit exemption, and
financial statement preparation or filing exemption.
They are not necessarily the same thing.
Audit Exemption Does Not Mean Accounting Exemption
This is one of the most important points for SME owners to understand.
Being exempt from statutory audit does not generally mean that a company can stop maintaining proper accounting records or ignore its financial reporting responsibilities.
ACRA has specifically emphasised that companies must continue keeping proper accounting records and preparing financial statements in accordance with prescribed accounting standards even where audit exemption applies, subject to specific exemptions such as those available to qualifying dormant relevant companies.
A company may therefore be:
not required to have its financial statements audited, while still being required to maintain proper accounting records and prepare financial statements.
These obligations should not be confused.
Audit Exemption and Financial Statement Filing Are Different
Another frequent misunderstanding involves filing financial statements with ACRA.
A company that qualifies for audit exemption is not automatically exempt from filing financial statements.
ACRA expressly notes that qualifying as a small company for audit exemption does not itself change the company’s financial statement filing requirements.
Whether financial statements must be filed depends on separate requirements.
For example, ACRA states that a solvent exempt private company (EPC) may not be required to file financial statements, although it can choose to do so voluntarily.
Companies should therefore separately determine:
Whether financial statements must be prepared.
Whether those financial statements require an audit.
Whether the financial statements must be filed with ACRA.
Whether XBRL filing requirements apply.
These are related but separate compliance questions.
What Happens When a Company Stops Qualifying as a Small Company?
Companies can grow beyond the small-company thresholds.
A company that previously qualified as a small company does not necessarily lose its status immediately simply because it exceeds a threshold in one particular year.
According to ACRA, once a company qualifies as a small company, it generally continues to qualify in subsequent financial years unless:
- It ceases to be a private company during a financial year; or
- It fails to meet at least two of the three quantitative criteria for the immediate past two consecutive financial years.
This two-year framework is important for growing businesses.
Management should monitor the company’s revenue, total assets and employee count annually rather than waiting until the financial year-end audit question arises.
Is Singapore Reviewing the Audit Exemption Thresholds?
Yes.
As of 2026, ACRA is reviewing Singapore’s audit exemption framework.
In February 2026, ACRA announced a consultation examining whether the revenue and asset thresholds should be increased and whether subsidiaries could potentially qualify for exemption under certain circumstances even when the overall group does not satisfy the existing small-group thresholds.
Importantly, this is a review of the framework, rather than a reason for companies to assume that the existing thresholds have already changed.
Businesses should therefore check the latest ACRA requirements when determining whether an audit is required for a particular financial year.
What Does a Statutory Auditor Actually Do?
A statutory audit usually involves several stages.
The exact work performed depends on factors such as the size of the business, industry, complexity of transactions, quality of accounting records and identified audit risks.
A typical audit may include the following areas.
Understanding the Business
The auditor develops an understanding of the company and its operating environment.
This may involve understanding:
- How the company generates revenue
- Major customers and suppliers
- Business processes
- Accounting systems
- Internal controls
- Related parties
- Financing arrangements
- Significant accounting estimates
- Major business risks
This understanding helps the auditor identify areas where material misstatements could arise.
Assessing Audit Risks
Not every account or transaction carries the same level of audit risk.
For example, depending on the nature of the company, areas requiring particular attention could include:
- Revenue recognition
- Inventory
- Trade receivables
- Related-party transactions
- Fixed assets
- Loans
- Cash and bank balances
- Accruals
- Provisions
- Management estimates
The auditor plans procedures in response to identified risks.
Obtaining Audit Evidence
Auditors obtain evidence through different procedures.
Depending on the circumstances, these can include inspecting supporting documents, testing selected transactions, obtaining external confirmations, performing analytical procedures and evaluating accounting estimates.
The nature and extent of audit procedures depend on professional judgement and the applicable auditing standards.
Reviewing Financial Statements
The auditor also reviews whether the financial statements have been prepared according to the applicable financial reporting framework and whether required disclosures have been appropriately presented.
Issuing the Auditor’s Report
After completing the audit, the auditor issues an independent auditor’s report containing the audit opinion.
The form of the opinion depends on the audit findings and circumstances.
What Documents May Be Required During an Audit?
Companies can make the audit process more efficient by maintaining organised accounting records throughout the year.
Depending on the business, auditors may request documents such as:
- Trial balance
- General ledger
- Bank statements
- Bank reconciliations
- Sales invoices
- Supplier invoices
- Expense supporting documents
- Payroll records
- CPF records
- Employment information
- Fixed asset register
- Inventory records
- Customer and supplier listings
- Loan agreements
- Lease agreements
- Shareholder and director information
- Related-party transaction schedules
- Tax computations
- GST records
- Corporate documents
- Contracts and agreements
The actual documents required will vary from one audit engagement to another.
Companies with properly maintained accounting records are generally better positioned to respond efficiently to audit requests.
How Should SMEs Prepare for Their First Statutory Audit?
A company’s first audit can be challenging if its accounting processes were originally designed for a much smaller business.
A growing SME should therefore prepare before an audit becomes necessary.
Keep Accounting Records Up to Date
Avoid waiting until the end of the financial year to reconstruct transactions.
Bank reconciliations, sales records, expenses and balance-sheet schedules should ideally be maintained regularly.
Maintain Supporting Documents
Important transactions should have appropriate documentation.
This becomes particularly important for unusual or material transactions.
Reconcile Balance Sheet Accounts
Companies should regularly review accounts such as:
- Bank balances
- Receivables
- Payables
- Loans
- Fixed assets
- Inventory
- Accruals
- Amounts due to or from directors
Unexplained balances can create unnecessary delays during an audit.
Review Related-Party Transactions
Transactions involving directors, shareholders, subsidiaries, related companies and other related parties should be properly identified and documented.
Prepare an Audit Schedule
Before audit fieldwork begins, the accounting team can prepare schedules supporting major financial statement balances.
This makes it easier for auditors to trace figures back to accounting records and supporting documentation.
How Long Does a Statutory Audit Take?
There is no universal timeframe.
The duration depends on several factors, including:
- Size of the company
- Complexity of operations
- Number of transactions
- Number of subsidiaries
- Quality of accounting records
- Availability of supporting documents
- Responsiveness of management
- Complexity of accounting issues
- Audit findings
A relatively straightforward SME with organised records may require substantially less work than a company with multiple entities, overseas operations, significant inventory or complicated transactions.
Companies should therefore speak with their auditor early rather than waiting until immediately before statutory filing deadlines.
What Is the Difference Between Accounting and Auditing?
Accounting and auditing perform different functions.
Accounting involves recording transactions, maintaining ledgers and preparing financial information.
Auditing involves independently examining financial statements and obtaining evidence to support an audit opinion.
The accountant may therefore help prepare the company’s financial statements, while the external auditor independently examines them.
Maintaining appropriate independence is fundamental to the external audit process.
Why Might an Audit Be Useful Even When It Is Not Legally Required?
Some companies choose to obtain an audit even when they qualify for statutory audit exemption.
There can be commercial reasons for doing so.
For example, audited financial statements may be requested by:
- Banks
- Investors
- Potential buyers
- Major customers
- Overseas parent companies
- Government agencies
- Grant providers
- Business partners
A company considering external investment, financing, acquisition or expansion may therefore decide that an audit is useful even where it is not statutorily required.
However, whether a voluntary audit is worthwhile depends on the circumstances and objectives of the business.
Can Shareholders Request an Audit?
Audit exemption does not necessarily prevent shareholders from seeking audited accounts.
In its 2026 review of the audit exemption framework, ACRA noted that existing safeguards include the ability of shareholders holding at least 5% of the company’s total issued shares to require an audit.
This safeguard recognises that minority shareholders may have an interest in obtaining independent assurance over the company’s financial statements.
Why Businesses Should Check Their Audit Status Every Year
Audit requirements should not be treated as a one-time question.
A company’s circumstances can change significantly.
For example, a business may:
- Experience rapid revenue growth
- Acquire substantial assets
- Increase its workforce
- Become part of a larger corporate group
- Acquire subsidiaries
- Change its ownership structure
- Cease being a private company
Any of these developments may affect its reporting or audit obligations.
Companies should therefore review their audit status as part of the annual financial reporting process.
Frequently Asked Questions About Statutory Audits in Singapore
Is audit compulsory for every Pte Ltd company in Singapore?
No.
A qualifying private company may be exempt from statutory audit under the small-company framework.
What are the current small-company audit exemption thresholds?
Under ACRA’s current framework, the company generally needs to meet at least two of three quantitative criteria: annual revenue of S$10 million or less, total assets of S$10 million or less, and 50 employees or fewer. The applicable assessment period and group requirements must also be considered.
If my revenue is below S$10 million, am I automatically audit exempt?
No.
Revenue is only one of the three quantitative criteria, and other conditions also apply.
If my company is audit exempt, do I still need accounts?
Generally, yes. Audit exemption should not be confused with an exemption from keeping accounting records or preparing financial statements. Specific exemptions can apply in circumstances such as qualifying dormant relevant companies.
Does having a corporate shareholder automatically mean an audit is required?
No.
ACRA confirms that companies with corporate shareholders can potentially qualify for the small-company audit exemption. However, group requirements may need to be considered.
Does being audit exempt mean I do not need to file financial statements?
Not necessarily.
Audit exemption and financial statement filing exemption are separate issues.
Can a company voluntarily have its accounts audited?
Yes. A company may have commercial, financing, shareholder or group-reporting reasons for obtaining an audit even when statutory audit exemption is available.
Choosing an Audit Firm in Singapore
Where a statutory audit is required, companies should appoint an audit firm with suitable experience for the nature and complexity of their business.
Factors businesses may consider include:
Relevant experience: The audit team should understand the company’s industry and typical accounting issues.
Communication: Clear communication can help management understand audit requests and resolve issues efficiently.
Capacity: The audit firm should be able to complete the engagement within the company’s reporting timetable.
Independence: External auditors must maintain the required independence from the company they audit.
Understanding of SMEs: For smaller businesses, an auditor familiar with SME accounting environments can be particularly useful.
Price is naturally a consideration, but it should not be the only factor when appointing an auditor.
Conclusion
A statutory audit is an important part of Singapore’s corporate financial reporting framework, but not every company is required to undergo one.
Under the current small-company audit exemption framework, qualifying private companies can be exempt where the applicable requirements are satisfied. The principal quantitative tests are annual revenue of S$10 million or less, total assets of S$10 million or less, and 50 employees or fewer, with at least two criteria generally needing to be met over the relevant assessment period. Group companies must also consider the applicable group-level requirements.
At the same time, audit exemption should not be confused with exemption from accounting, financial statement preparation or financial statement filing obligations.
As businesses expand, their audit position can also change. Growing companies should therefore monitor revenue, assets, employee numbers and group structure rather than assuming that an exemption obtained previously will continue indefinitely.
For companies that are approaching the thresholds, entering a corporate group or preparing for their first statutory audit, early planning can make the process considerably smoother. Maintaining proper accounting records, reconciliations and supporting documentation throughout the year can reduce delays when audit work begins.
For businesses looking for professional audit services in Singapore, an experienced audit firm can help determine the applicable audit requirements and carry out the statutory audit in accordance with Singapore’s financial reporting and auditing requirements.
Find out more at Koh & Lim Audit PAC