How To Tell If Your Business Is Eligible For Audit Exemption
Auditing is one of the most complex and challenging tasks that companies experience as much as its one of the basic compliance requirements that every company in Singapore should adhere to. Regardless of how versatile the company’s accounting and financial systems are, much focus is normally given to auditing if a company stands out as reputable and successful. The auditing process begins with engaging a reputable audit firm in Singapore; however, with the new small company concept, a number of companies are likely to enjoy audit exemption.
As much as business entities in Singapore are required to have their financial accounts audited by the end of each financial year, small companies qualify for audit exemption, and know what warrants exemption is vital for every company. A company is considered to be small and entitled to audit exemption in Singapore if it’s first a private company and also manages to fulfill at least two of the below quantitative criteria;
- A company is considered small if the annual revenue that’s evaluated at the end of each preceding financial year doesn’t exceed S$10 million.
- A company qualifies for an audit exemption if the total assets evaluated at the end of the preceding fiscal year don’t exceed S$10 million.
- A company is considered small if the total number of full-time employers on the payroll at the end of the financial year doesn’t exceed 50.
Despite qualifying for audit exemption, small companies are still required to submit financial statements with ACRA since this is the record used for computing tax returns. If in case a company is a holding company or a subsidiary of another bigger company then it’s considered as part of a group company. According to Inland Revenue Authority of Singapore; the decision of whether a company qualifies for audit exemption or not is evaluated based on the facts and figures of the entire group of companies.
For a group company to qualify for audit exemption, the holding company, which is also the parent company alongside the subsidiaries, should fulfill the criteria shared above. For example, suppose a group is looking for audit exemption for the financial year ending 2020. In that case, the company should be able to meet the above criteria for a small group in the financial years 2018 and 2019. The group’s individual companies should also be able to the criteria for a small company.
Some instances can cause a company to be disqualified from audit exemption. A company fails to qualify for audit exemption if it’s no longer operating as a private company within a given financial year. It can also be disqualified if it fails to satisfy a small company’s criteria in two preceding financial years. Regardless of whether a company is exempted from audit or not; a company must maintain proper accounting records. Working with a reputable corporate service provider in Singapore should be considered small companies are still required to submit annual financial statements when filing corporate income tax returns.
Engaging a reputable corporate service provider for tax filing can be of great benefit as you will be assured of quality service. It’s vital that the company maintains proper accounting records since ACRA may opt to carry out periodic spot checks or an auditor might be appointed to audit the company’s financial records if the company is involved in some legal issue. Working with Onestop CA, Singapore for corporate services can help in ensuring that all the compliance issues are well taken care of.