Not every Singapore company has to be audited. Since 2015, a large share of private companies have qualified for the small company audit exemption under the Companies Act 1967, which frees them from appointing an auditor and filing audited financial statements. For an owner-managed business, that can save several thousand dollars a year and weeks of audit fieldwork. But the exemption is not automatic, it is not permanent, and it is easy to lose without noticing. This 2026 guide explains who qualifies, how the two-year rule works, and the traps that catch growing companies.
Getting this right matters because directors, not the auditor, are responsible for deciding whether the exemption applies. If a company wrongly treats itself as exempt, it can end up filing non-compliant accounts with ACRA and scrambling for a late audit. If you are unsure where your company sits, our team can review your numbers as part of a wider corporate secretarial and accounting engagement.
What is the small company audit exemption?
Under section 205C of the Companies Act 1967, a company that qualifies as a “small company” is exempt from the statutory requirement to have its financial statements audited. The concept was introduced on 1 July 2015 to replace the older exempt private company revenue-based exemption, which was narrower and turned on share ownership rather than size.
An audit exemption does not excuse a company from preparing financial statements. Every company must still prepare accounts that comply with the Singapore Financial Reporting Standards, table them at the annual general meeting (or send them to members if AGMs are dispensed with), and file them with ACRA where required. The exemption simply removes the obligation to have an independent auditor express an opinion on those accounts.
The “small company” test
A company qualifies as a small company for a financial year if it is a private company throughout that year and it meets at least two of the following three quantitative criteria:
The three criteria
| Criterion | Threshold |
|---|---|
| Total annual revenue | Not more than S$10 million |
| Total assets (at end of financial year) | Not more than S$10 million |
| Number of employees (at end of financial year) | Not more than 50 |
The company only needs to satisfy any two of the three. So a capital-heavy business with high assets but modest revenue and headcount can still qualify, and a lean services firm with high revenue but few staff and low assets can too.
Two threshold points are worth remembering. First, the company must be private, so a public company can never be a small company. Second, a company that is part of a group must also consider whether the whole group qualifies as a “small group”, because a small company that belongs to a group only stays exempt if the group as a whole meets the same two-of-three test on a consolidated basis.
The two-year rule and how a company enters and exits the exemption
The exemption is built around a two-year look-back so that companies do not flip in and out of audit every year on a single bad quarter.
A company that was already small continues to qualify until it fails to meet the criteria. Once it is small, it stays small until it is disqualified for two consecutive financial years. In other words, breaching the thresholds in a single year does not immediately push you back into audit. You only lose the exemption if you fail to meet at least two of the three criteria for two financial years in a row.
For a newly incorporated company, the test is applied prospectively. A company qualifies as a small company in its first two financial years if it is private and meets two of the three criteria in each of those years. This means a start-up incorporated through our incorporation service, guided by its company secretary, is typically exempt from audit from day one, provided it stays within the size limits.
Small group: the trap for companies with subsidiaries or a holding company
The most common mistake we see is a director looking only at the single company’s numbers. If your company is part of a group, the audit exemption applies only if both of the following are true: the company itself qualifies as a small company, and the group to which it belongs qualifies as a small group.
A group is a small group if it meets at least two of the same three criteria (revenue, assets, employees) on a consolidated basis, applying the same two-year logic. So a small trading subsidiary sitting under a large holding structure may still require an audit even though its own accounts are tiny, because the consolidated group breaches the thresholds. If you operate a holding-and-subsidiary structure, this is worth checking every year.
When you still need an audit even if you qualify
Even a company that meets the small company test can be required to be audited in several situations:
Members holding at least 5% of the total voting shares can require the company to be audited by giving notice under the Companies Act, and the directors must then arrange an audit for that year. Certain companies are excluded from the exemption entirely, and a company’s constitution, bank covenants, investor agreements, or a government grant condition may contractually require audited accounts regardless of the statutory position. Regulated entities and companies in specific licensed sectors are also frequently required to be audited under their own regulatory regimes.
It is also common for a buyer in an acquisition, or an incoming investor, to insist on audited historical accounts as part of due diligence. So the practical question is not only “are we legally exempt”, but “does anyone we deal with require an audit anyway”.
What exempt companies still have to do
Being audit-exempt does not reduce your other statutory obligations. A small company must still:
Keep proper accounting records and prepare compliant financial statements, hold its AGM or validly dispense with it, file its annual return with ACRA on time, keep its statutory registers current, and file its corporate income tax returns (ECI and Form C-S/C) with IRAS. Directors also remain personally responsible for the truth and fairness of the accounts.
Where financial statements need to be filed in XBRL, the exemption from audit does not remove the XBRL filing obligation. Many smaller companies file a reduced XBRL data set, but the requirement still stands.
Should a qualifying company choose to be audited anyway?
Some directors voluntarily commission an audit even when exempt. The usual reasons are credibility with banks and lenders, readiness for a future fundraising or sale, comfort for minority shareholders, and stronger internal controls. An audit can also surface accounting errors before they compound. For most small owner-managed companies with a single shareholder group and no external financing, the cost usually outweighs the benefit, and a well-run set of unaudited accounts is sufficient.
Frequently asked questions
Does a dormant company need an audit?
Dormant companies have their own separate exemption from audit under the Companies Act, distinct from the small company exemption, and most dormant companies are exempt. They may still need to prepare and file accounts unless they also qualify to be exempt from preparing financial statements.
We exceeded S$10 million revenue this year. Do we need an audit now?
Not necessarily. Because of the two-year rule, a single year of breaching the thresholds does not remove the exemption. You lose it only after failing the two-of-three test for two consecutive financial years, provided you were previously small.
How do we count employees?
The employee count is taken at the end of the financial year and generally refers to full-time employees. Companies close to the 50-employee line should document how they counted, as it affects whether that criterion is met.
Determining audit status, tracking the two-year rule, and testing the small-group position each year are exactly the sort of housekeeping a good corporate secretary and accountant should handle for you. Raffles Corporate Services can assess your company’s position and keep it monitored year to year. Speak to us via our contact page to get started.
You can read the statutory provisions on Singapore Statutes Online and ACRA’s guidance on audit and financial reporting at acra.gov.sg.
— The Editorial Team, Raffles Corporate Services