For most Singapore SMEs, the question “do we need to be audited?” has a one-line answer: not if you qualify as a “small company” under Section 205C and the Thirteenth Schedule of the Companies Act 1967. The small-company audit exemption is one of the most useful concessions in the Singapore regime — done right, it saves a private company tens of thousands of dollars a year and a meaningful chunk of management time.
Done wrong, it creates a different set of problems: late realisation that the company has crossed a threshold, retrospective appointment of an auditor to comply with Section 205, and a strained set of accounts at the next AGM. With ACRA reviewing the thresholds in 2026, it is also a good time to revisit whether your business is still safely inside the exemption or sitting on the edge.
This guide explains the eligibility test, the group-level test for parent companies, the disqualifying circumstances, and what changes when ACRA confirms the new thresholds. For tailored advice, Raffles Corporate Services reviews audit-exemption status as part of every annual close engagement.
Who Can Even Be Considered: Private Companies Only
The small-company audit exemption is available only to private companies. Public companies — listed or unlisted — must always have their financial statements audited regardless of size. So must companies limited by guarantee that exceed certain thresholds, and any company that is required to be audited by another statute (for example, Singapore-licensed financial institutions and certain regulated entities).
If you are not sure of your company’s status, the easiest check is the company’s name on Bizfile — a private limited company will be designated “Pte Ltd”. For background on company types and structures, see our guide on Singapore entity structures.
The Two-of-Three Test: How to Qualify
A private company is a “small company” if it satisfies at least two of the following three quantitative criteria for each of the two immediately preceding financial years:
- Total revenue for the financial year does not exceed S$10 million;
- Total assets as at the end of the financial year do not exceed S$10 million;
- Number of employees as at the end of the financial year does not exceed 50.
“Total revenue” is determined in accordance with the applicable accounting standards. “Total assets” is the consolidated total of fixed and current assets. The 50-employee headcount is a snapshot at year-end, not an average. Part-time and contract employees are typically counted on a per-head basis (not full-time equivalent), so growing companies with hybrid workforces should watch this number closely.
The “Two Immediately Preceding Financial Years” Twist
You qualify as a small company in Year N only if you met at least two of the three criteria in both Year N-1 and Year N-2. A company that incorporated mid-year, or that has had a heavy year (for example, a strong revenue spike from a project), can find itself outside the exemption even where it is small in absolute terms.
Newly incorporated companies enjoy a transitional concession: in the first or second year of incorporation, they qualify as small if they meet two of the three criteria for that single year (because there is no two-year history yet).
The Small-Group Test for Parent Companies
If the company is part of a group — i.e., it has subsidiaries or is itself a subsidiary — Section 205C overlays a “small group” test. To qualify for audit exemption, the entire group must satisfy at least two of the following three thresholds on a consolidated basis for the two immediately preceding financial years:
- consolidated revenue ≤ S$10 million;
- consolidated assets ≤ S$10 million;
- aggregated employees ≤ 50.
This is what catches a lot of holding companies. A Singapore parent company can comfortably meet the small-company test on a stand-alone basis, but if its consolidated group is over S$10 million in revenue or assets, neither the parent nor its Singapore-incorporated subsidiaries can claim audit exemption. The whole group has to be audited.
Foreign subsidiaries count for the purpose of consolidation. If you have an operating Vietnam, Indonesia or Australia entity, its numbers feed into the group test even though the foreign company itself is governed by its own audit regime.
Disqualifying Events: What Knocks You Out
A small company will lose audit exemption if:
- it ceases to be a private company (for example, on conversion to a public company); or
- it does not meet the two-of-three test for any two consecutive financial years.
The disqualification operates from the financial year following the second consecutive year of non-compliance. Once you fall out, you are obliged to appoint an auditor and prepare audited financial statements for that next financial year. Reverting to small status requires meeting the test for two consecutive financial years again.
Practical Implications: What an Audit Exemption Saves and Doesn’t Save
Audit exemption removes the requirement for an external auditor’s report on the financial statements. It does not remove:
- the requirement to keep proper accounting records under Section 199;
- the obligation to prepare financial statements that comply with the Financial Reporting Standards in Singapore;
- the requirement to lodge financial statements (in XBRL, where applicable) with ACRA in the annual return — see our XBRL filing guide;
- the obligation to file Estimated Chargeable Income (ECI) and Form C-S/C with IRAS;
- directors’ duties to present a true-and-fair set of accounts at the AGM under Section 201 — see our AGM compliance guide.
In other words: the books still have to be done properly, and ACRA, IRAS and your bank can still ask for them. The saving is the audit fee plus the management time to support the audit process — both real, but not a get-out-of-bookkeeping card.
When You Should Choose to Be Audited Anyway
Some companies elect to be audited even though they qualify as small. Common drivers:
- bank financing covenants that require audited accounts;
- parent-company group reporting requirements (typical for Singapore subsidiaries of MNCs);
- institutional investors, family offices or PE shareholders who require audited accounts as a condition to subscription;
- government grant requirements — some EDG/MRA grant claims require audited accounts as supporting documentation;
- preparation for a future M&A exit, where an audit history smooths the due-diligence process.
The 2026 Review of Thresholds
ACRA has flagged a review of the S$10 million / S$10 million / 50-employee thresholds, which have been unchanged since 1 July 2015. The likely direction of travel is upward, in line with comparable regimes in the UK, Australia and New Zealand. Targeted industry consultation began in March 2026.
If your company is currently sitting just above the S$10 million revenue or asset threshold, it is worth tracking the consultation outcome. A modest upward revision could put you back inside the exemption. Until ACRA publishes final guidance, however, the existing thresholds continue to apply.
How Raffles Corporate Services Can Help
We assess audit-exemption status as a routine part of the annual close — for the company on a stand-alone basis and at the group level where applicable. Where the company has fallen out of the exemption, we coordinate the appointment of an auditor, the preparation of audited financial statements, and the related XBRL filings. Where there is doubt, we will run the year-end numbers against the test before the financial statements are finalised so that the directors can make an informed call. Speak to Raffles Corporate Services for a review.
— The Editorial Team, Raffles Corporate Services