FAQ

Under the Singapore Companies Act, companies are generally required to have their financial statements audited unless they qualify for audit exemption as a small company or as part of a small group. A company qualifies as a small company if it meets at least two of the following criteria for the financial year: total annual revenue does not exceed S$10 million, total assets do not exceed S$10 million, and the total number of employees does not exceed 50.

Companies that do not meet this exemption criteria are required to appoint an auditor and have their financial statements audited annually. In addition, certain entities may also be required to undergo audits due to licensing requirements, regulatory obligations, financing arrangements, or contractual agreements with third parties.

A statutory audit is an independent examination of a company’s financial statements conducted by a registered public accountant. The purpose of the audit is to enable the auditor to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework such as the Singapore Financial Reporting Standards and the requirements of the Companies Act.

Audited financial statements provide assurance to users such as shareholders, lenders, regulators, and other stakeholders that the financial information has been independently reviewed. The audit process also involves examining accounting records, reviewing supporting documents and performing audit procedures to obtain sufficient appropriate audit evidence, as well as assessing whether the financial statements are presented fairly and consistently in accordance with the applicable accounting standards and financial reporting framework.

Companies that are required to undergo a statutory audit must appoint an auditor within three months from the date of incorporation unless they qualify for audit exemption. The appointment is usually made by the company’s directors and must be properly recorded in the company’s statutory records.

Once appointed, the auditor generally remains in office until the next annual general meeting of the company, unless the auditor resigns or is replaced in accordance with the procedures set out under the Companies Act. The timely appointment of an auditor ensures that the company can comply with its financial reporting and statutory filing requirements.

The audit process requires the auditor to review various accounting records and supporting documents to obtain sufficient appropriate audit evidence. These may include financial statements, general ledger reports, bank statements, sales invoices, suppliers’ invoices, contracts, payroll records, and other supporting schedules relevant to the company’s financial transactions.

Management may also be required to provide explanations or clarifications relating to certain transactions or accounting treatments. The completeness and organisation of accounting records can significantly affect the efficiency of the audit process and the time required to complete the audit engagement.

The duration of an audit engagement can vary depending on the size of the company, the complexity of its transactions and the quality of its accounting records. For many small and medium sized companies, the audit process may take several weeks once the necessary documents and supporting schedules have been made available.

Where the business operations are more complex or where additional information is required during the audit process, the audit may take a longer period to complete. Proper preparation of accounting records and timely responses to audit queries can help facilitate a smoother audit process.

The preparation of financial statements is the responsibility of the company’s management and typically involves compiling accounting records and preparing the financial statements in accordance with the applicable accounting standards. This work may be carried out internally or with the assistance of in-house accountants or external service providers.

An audit, on the other hand, is an independent examination performed by a registered public accountant. The auditor reviews the financial statements prepared by management and performs audit procedures to form an opinion on whether the financial statements are presented fairly in accordance with the relevant financial reporting framework.

Yes, some companies may choose to have their financial statements audited even if they qualify for audit exemption under the Companies Act. Voluntary audits are sometimes undertaken where stakeholders such as banks, investors or shareholders require independently verified financial statements.

In some cases, audited financial statements may also be required when companies participate in project tenders or procurement processes where financial credibility is assessed. In certain situations, audited financial statements may also provide additional credibility to the company’s financial information when seeking financing, business partnerships, or investment opportunities. The decision to undertake a voluntary audit will depend on the company’s specific business and reporting requirements.

Audited financial statements can enhance the reliability and credibility of financial information presented to shareholders, lenders, and other stakeholders. Independent verification by an auditor may provide greater confidence that the financial statements have been prepared in accordance with the applicable accounting standards.

During the audit process, auditors may also identify weaknesses in accounting procedures or internal controls. These observations may assist management in improving financial reporting processes and strengthening internal controls within the organisation.

Companies that are required to have their financial statements audited but fail to appoint an auditor may be in breach of the provisions of the Singapore Companies Act. This may result in regulatory issues and may affect the company’s ability to meet its statutory filing obligations.

In addition, failure to comply with audit requirements may lead to delays in the preparation of financial statements or difficulties in meeting obligations to regulators, lenders, or other stakeholders. Companies should therefore ensure that an auditor is appointed in accordance with the statutory requirements.

TY Tan Assurance provides statutory audit services and other assurance engagements for companies operating in Singapore. These services support businesses in meeting their financial reporting and regulatory requirements in accordance with the applicable auditing standards and professional guidelines.

The firm works with clients to review financial information, perform audit procedures and issue the appropriate audit reports where required. Our engagements are carried out in accordance with the Singapore Standards on Auditing and other relevant professional requirements applicable to public accounting practices in Singapore.