Statutory Audit Requirements in Singapore: Key Compliance Rules You Must Know

Statutory Audit Requirements in Singapore: Key Compliance Rules You Must Know

A statutory audit is a legal requirement for many companies in Singapore, ensuring that financial statements are accurate, reliable, and comply with regulatory standards. Under the Companies Act 1967, businesses that meet certain criteria are mandated to undergo an independent audit by a qualified public accountant.

Whether you’re a startup approaching growth, an SME expanding its operations, or a director unsure of your obligations, understanding the statutory audit requirements in Singapore is critical. This article provides a comprehensive breakdown of the legal rules, exemption criteria, key deadlines, and compliance responsibilities involved in statutory audits.

What Is a Statutory Audit?

A statutory audit is an independent examination of a company’s financial statements conducted in accordance with the Singapore Standards on Auditing (SSA) and the Singapore Financial Reporting Standards (SFRS).

The goal of the audit is to provide stakeholders—shareholders, regulators, banks, and tax authorities—with reasonable assurance that the company’s financial statements present a true and fair view of its financial performance and position.

Statutory audits are not optional for companies that fall outside the audit exemption limits. Failure to comply with statutory audit requirements can lead to legal penalties and reputational damage.

Legal Framework: Companies Act 1967

In Singapore, statutory audit requirements are governed by:

• Companies Act 1967

• ACRA (Accounting and Corporate Regulatory Authority)

• Institute of Singapore Chartered Accountants (ISCA)

Under Section 205 of the Companies Act, companies that are not exempt must appoint an auditor within 3 months of incorporation and prepare audited financial statements annually.

Audit Exemption Criteria: The Small Company Concept

Since July 1, 2015, Singapore introduced the “small company” audit exemption, aimed at easing the compliance burden for smaller private companies.

To qualify as a small company, an entity must:

1. Be a private company throughout the financial year

2. Satisfy at least two of the following three criteria for the past two consecutive financial years:

   • Total annual revenue not more than S$10 million

   • Total assets not more than S$10 million

   • Number of employees not more than 50

For companies belonging to a group, the small group exemption also applies, requiring the group as a whole to meet similar criteria on a consolidated basis.

If a company or group fails to meet the audit exemption thresholds, it is legally required to engage a statutory auditor annually.

Appointment of Auditors

Companies requiring a statutory audit must appoint an auditor:

• Within 3 months of incorporation

• At each Annual General Meeting (AGM) thereafter, unless the auditor is reappointed automatically

The appointed auditor must be a public accountant registered with ACRA, or a licensed Public Accounting Corporation (PAC).

Preparation of Financial Statements

Audited companies must prepare financial statements that comply with SFRS. These typically include:

• Statement of financial position (balance sheet)

• Statement of comprehensive income (profit & loss)

• Statement of changes in equity

• Cash flow statement

• Notes to the accounts

The financial statements must reflect a true and fair view of the company’s financial condition and must be presented to shareholders at the AGM.

Key Compliance Deadlines

Companies required to undergo a statutory audit must adhere to the following deadlines:

Failure to meet these deadlines may result in penalties, fines, or prosecution.

Filing Requirements with ACRA

After completing the statutory audit, companies must file:

• Annual Return (AR) – Submitted via ACRA’s BizFile+ portal

• Audited financial statements – Must be in XBRL format (for most companies)

Companies must retain supporting documentation and audit reports for at least 5 years for regulatory and compliance checks.

Common Non-Compliance Issues

Many companies fail to comply fully with statutory audit requirements due to lack of awareness or poor internal processes. Common issues include:

1. Late appointment of auditors

2. Incomplete or inaccurate financial records

3. Failure to meet audit deadlines

4. Improper classification of small company status

5. Non-submission of financial statements in XBRL format

To avoid these issues, companies should maintain proper bookkeeping, engage professional service providers, and conduct timely internal reviews.

Implications of Non-Compliance

Failure to comply with statutory audit requirements can result in:

• Fines of up to S$5,000 per breach

• Court prosecution for directors

• Disqualification of directors

• Difficulty obtaining loans or investor funding

• Poor business credibility

ACRA takes audit compliance seriously, and enforcement actions are regularly taken against companies that fail to meet obligations.

Benefits of a Statutory Audit Beyond Compliance

While compliance is the primary reason for a statutory audit, there are broader benefits to having your financials audited:

✅ Improved Financial Accuracy

Audits help identify errors, inconsistencies, and areas for improvement in financial reporting.

✅ Stakeholder Confidence

Investors, banks, and regulators are more likely to trust and engage with companies that have audited statements.

✅ Fraud Detection

An independent audit can uncover fraud, embezzlement, or misuse of funds that may otherwise go undetected.

✅ Better Business Insights

Auditors often provide feedback on internal controls and financial performance, aiding in better business decision-making.

✅ Enhanced Valuation

Companies with a clean audit trail are more attractive for acquisition, partnerships, and expansion.

Should You Voluntarily Conduct an Audit?

Even if your company qualifies for an audit exemption, you may still consider a voluntary audit. This is especially useful for:

• Seeking bank loans

• Attracting investors

• Planning for M&A

• Ensuring good corporate governance

• Applying for government grants

Voluntary audits signal professionalism and enhance your business reputation.

Choosing the Right Audit Partner

Your choice of auditor plays a big role in the audit experience. When selecting a statutory auditor in Singapore, consider:

• ACRA registration and licensing

• Industry knowledge

• Track record and reviews

• Communication style and responsiveness

• Reasonable and transparent fee structure

A good audit firm will not only ensure compliance but also help strengthen your accounting and governance framework.

Conclusion

Statutory audits are a fundamental part of business regulation in Singapore. Knowing the statutory audit requirements, key deadlines, exemption rules, and legal implications is crucial for staying compliant and running your business smoothly.

If your company no longer qualifies as a small company, it’s time to start planning for an annual statutory audit. Engage a reputable audit firm early, maintain your financial records well, and ensure timely filing to stay on the right side of the law.

Understanding your obligations today ensures you avoid penalties tomorrow—and positions your company for long-term credibility and growth.

If you need help with statutory audit, visit https://kohlimaudit.sg/services_post/company-statutory-financial-audit-singapore/