Audits in Singapore- Is it Mandatory?
All entities are required to comply with the rules of carrying out Audits in Singapore. Audits in Singapore are carried out compulsorily as per the laws. These are carried out to ensure that the value presented in the financial statement is true and fair. The Companies Act of Singapore requires companies to carry out Audits. As per the companies act, entities require to hire an auditor if they satisfy the minimum requirements.
Carrying out audits in Singapore is mandatory if it is not exempt under any form of law in force. A business requires complying with the norms laid down by the Accounting and Corporate Regulatory Authority (ACRA). An entity carrying out regular audits comes under the compliance of the ACRA.
Requirements of Audits in Singapore
If an entity is required to carry out an Audit, it must comply with the ACRA requirements. The ACRA has set specific guidelines if an entity has to carry out an audit. For carrying out audits in Singapore, the following has to be considered:
Auditors have to be Appointed
As per the requirements of the Singapore Companies Act, the company has to appoint an auditor. This requirement is mandatory if the company has to carry out Audits in Singapore. The appointment of auditors has to compliant with the rules of the ACRA. If companies are exempted from this requirement, then no auditor has to be appointed.
Responsibilities of Auditor
Auditors have to carry out Audit diligently. Apart from this, the auditors have to comply with the standards of auditing. These standards must be according to the standards of the ACRA. However, auditors also have to abide by the standards of international Audits such as IFRS and GAAP. Apart from this, the auditors are also responsible for reviewing the financial statements. Financial statements that are reviewed by Auditors are put forth before the Annual General Meeting (AGM).
Remuneration paid to an Auditor
A company using an entity that performs Audit has to disclose the same in the general meeting. The disclosure will indicate, the remuneration charged by the auditor. It is the responsibility of the directors to fix the remuneration. However, this depends on the terms and conditions of their appointment. If the auditor is appointed after a resolution taken in the general meeting (GM), then the remuneration must be decided in the GM.
Which Entities are exempt from carrying out audits in Singapore?
Though all entities are required to submit audits, there are specific entities exempted from performing Audit. The following are the entities that are not eligible to carry out an audit:
The Singapore Companies Act requires every company to submit audits within a particular period. Due to the 2014 amendment in the Companies Act, the Government of Singapore, and the ACRA has exempted specific companies from submitting audits. If a company is classified as a small company, then audits in Singapore are not required. This amendment is brought into force from 1 July 2015. Hence, this will applies to all companies that satisfy the requirement of a small company. The following requirements have to be satisfied with an entity being classified as a small company:
- Revenue earned by the company must not be more than SGD 10 Million (Singapore Dollars);
- Assets owned by the company at the end of the financial year must not be more than SGD 10 Million (Singapore Dollars); and
- The number of employees at the end of the financial year must not be more than 50.
Hence, if a company satisfies the above criteria, it is exempt from carrying out audits in Singapore.
Groups of Companies (Small Companies)
As per the Singapore Companies act, group companies form a part of the parent company. The meaning of Group Company is present under the Singapore Companies Act, as the holding company (parent company) and the subsidiaries that form a part of the group structure. The level of control will determine the relationship between the parent company and its subsidiaries. As per the Singapore Companies Act, group companies would also be exempted from carrying out audits in Singapore, if the parent company and all its subsidiaries satisfy the following requirements:
- A group company (i.e., its parent company and all the subsidiary companies) must satisfy at least two requirements of a small company in Singapore.
- Any of the entities under the group company has to come under the definition as a small company.
- To qualify as a small company, if the parent company and its subsidiaries satisfy at least two criteria of a small company.
Under audits in Singapore, a company that has not carried out any transaction from the time of incorporation is considered a dormant company. The above definition is as per the ACRA. As per the Singapore Companies Act, a company is considered dormant if no transaction is carried out. For interpretation, the transaction can be understood as an accounting or financial transaction. The following criteria have to be satisfied with a company to be dormant:
- No accounting transaction or financial transaction can take place from the time of the formation of the company.
- From the beginning of the financial year to the end of the financial year, no transaction has occurred.
Who Regulates Audits in Singapore?
The central regulatory authority for Audits in Singapore is the Accounting and Corporate Regulatory Authority (ACRA). All entities are required to submit audits in Singapore. Apart from this, the Singapore Companies Act regulates the provision for carrying out regular audits in Singapore. However, specific companies are exempt from performing audits in Singapore. They have to satisfy the eligibility criteria for this purpose. The Companies (Amendment) Act 2014 brought out the amendment in the Singapore Companies Act to exempt small companies from carrying out audits.
Procedure for Carrying Out Audits in Singapore
When an entity registers with the ACRA, it is crucial to know if audits are required to be carried out. For specific entities, carrying out an audit is mandatory, and for few entities, carrying an audit is not mandatory. The following steps are required for conducting audits in Singapore:
The company or entity has to first understand the requirement for conducting an audit. They have to coordinate with the ACRA to understand if they fall under the exempted entities category. If they fall under the category of exempted entities, then no audit is required. However, even if a company is exempted, the registrar of companies (ROC) may require the company to file its audit statement and audit report if it has contravened any provisions related to:
- Maintaining Accounting records; and
- Not keeping the financial statements as required, according to the Singapore Companies Act.
If the company requires performing Audit, then the company must appoint an entity that specializes in conducting audits in Singapore. This must be done within three months of the incorporation of the company. A public accountant who has the requisite skills under the ACRA can be appointed to audit the company.
Auditor’s appointment term will be until the next Annual General Meeting (AGM). If the company is newly incorporated, the auditor will hold office until the first annual general meeting.
After this, the company has to appoint another auditor or use the same auditor for the AGM. The same auditor can be rotated as per the requirements of the company.
Non Appointment of Auditors
If an auditor is not appointed by the directors' within the prescribed timeline, any individual in the company can make an application to the ACRA. The ACRA will appoint an auditor as per the requirements. An auditor can be removed if a special resolution is passed in the general meeting (GM).
The auditor must carry out the duties as per the requirement of the ACRA. The following duties have to be carried out by the auditor:
- The auditor must follow the compliance of standards of accounting and reporting.
- The auditor has to act according to the code of conduct of the organization.
- The auditor must also verify the financial reports of the company. Apart from this, the auditor must provide an informed opinion on the company's true state of accounts.
- They are also required to provide reports to the executives.
Remuneration to Auditor
For the exchange of audit services, the company has to compensate for the auditor. Disclosure of the compensation must be made in the general meeting about the remuneration paid to the auditor. The payments must be made in the following manner:
- 5% of the total members of the company.
- Shareholders who have at least more than 5% of the company (5% of the paid-up value of the shares in the company).
The fees of the auditor can be decided either by the directors or the members of the GM. The authority for deciding the fees paid to the auditor can be transferred from the shareholders to the company's directors.
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- We will guide you through the entire process of auditing.
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