Introduction
Deciding when to appoint an external auditor is an important compliance decision for any company in Singapore. This article, When Should Your Company Appoint an External Auditor?, explains the circumstances that make an audit mandatory, when private companies may qualify for an exemption and the administrative steps involved.
Understanding the audit rules under the Companies Act and ACRA requirements helps company directors and corporate secretaries meet filing deadlines and avoid penalties. Raffles Corporate Services can assist with filings, compliance, accounting and tax support if you need practical help.
Who this applies to
This guidance applies to companies incorporated in Singapore, including:
- Private companies limited by shares (the most common structure for SMEs).
- Public companies, listed companies and other public interest entities.
- Foreign companies with a Singapore branch or subsidiary.
It is relevant to company directors, company secretaries, finance teams, and business owners considering company incorporation Singapore or ongoing corporate compliance obligations.
Key rules and requirements in Singapore
Singapore’s Companies Act sets out audit obligations. Key points to note are:
- Mandatory audit: Public companies, listed entities, banks, insurers and other regulated or public interest entities must have their financial statements audited by an external auditor.
- Private company exemption: Private companies may be eligible for an audit exemption if they qualify as a “small company” (or part of a “small group”) under the Companies Act and meet the quantitative criteria for the relevant financial years.
- Quantitative criteria: A company is regarded as “small” if it meets at least two of the three thresholds commonly applied (turnover, total assets, and number of employees). Check the latest thresholds and definitions from ACRA as these may be updated.
- Timing: A company must appoint an auditor no later than three months after incorporation unless it qualifies for an exemption or a waiver.
- Who may act as auditor: An external auditor must be a practising public accountant or an audit firm registered with the relevant Singapore authorities. Ensure the auditor holds the appropriate practising certificate and registration.
- Notifying ACRA: Appointments, changes and resignations of auditors must be filed via the ACRA BizFile+ portal within the stipulated timeframes.
- Statutory filings: Audited financial statements are used for tax filings with IRAS, lender requirements and some regulatory submissions (for example, when applying for Government grants or tax incentives).
Step-by-step process
Below is a practical process to ensure timely auditor appointment and compliance.
- Assess whether your company is required to have an audit. Check if you are a public interest entity or if you meet the small company criteria for exemption.
- Decide on the timing. If required, appoint an auditor within three months of incorporation.
- Identify eligible auditors. Choose a public accountant or audit firm registered in Singapore with the necessary practising certificate.
- Board resolution. Obtain a board resolution to appoint the auditor. Document the appointment in board minutes.
- File with ACRA. Lodge the auditor appointment via the ACRA BizFile+ portal within the prescribed deadline.
- Provide financial records. Prepare accounting records, statutory books and supporting schedules for the auditor. For most companies, audited financial statements are prepared for each Financial Year End.
- Audit process and report. The auditor conducts the audit, issues an audit report and furnishes audited financial statements to the company for AGM and statutory purposes.
- Keep IRAS and stakeholders informed. Use audited accounts for IRAS tax submissions (via myTax Portal) and to satisfy banks, investors or regulatory authorities where required.
Common mistakes to avoid
- Assuming audit exemption applies automatically. Exemption depends on meeting criteria and may require shareholder approval in certain cases.
- Missing the three‑month appointment deadline after incorporation when no exemption applies.
- Appointing an auditor who is not registered or does not hold a practising certificate in Singapore.
- Failing to notify ACRA via BizFile+ of auditor appointments, changes or resignations within the required period.
- Using unaudited accounts for statutory or lender requirements when audited statements are explicitly requested.
Practical examples
These scenarios illustrate typical situations where audit obligations arise:
- Example 1 — Small private start-up: A two‑director private company with turnover of S$300,000, assets of S$50,000 and fewer than 10 employees may qualify as a small company and be exempt from audit. The directors should verify the small company criteria with ACRA and consider whether the group structure affects eligibility.
- Example 2 — Company seeking bank financing: A private company may be required by its bank to provide audited financial statements for loan underwriting even if the company technically qualifies for an audit exemption.
- Example 3 — Foreign investor or grant application: Some incentive schemes and foreign investors insist on audited accounts; appointing an auditor early streamlines such applications and assures stakeholders.
- Example 4 — Public company or regulated entity: A listed company or a financial institution must appoint an auditor and cannot claim the audit exemption.
How a corporate secretary can help
A professional corporate secretary in Singapore can add value by:
- Advising on whether your company qualifies for an audit exemption and the implications under the Companies Act.
- Coordinating the board resolution, preparing the necessary minutes and assisting with the appointment or change of auditor.
- Filing auditor appointments, resignations and related documents on ACRA via BizFile+ to ensure statutory compliance.
- Working with your auditor, finance team and external advisers to prepare financial statements for IRAS filings, grant applications or lender requirements.
Raffles Corporate Services can assist with these administrative and compliance steps, including accounting, statutory filings and payroll support if required.
Frequently Asked Questions
When must a company appoint an external auditor?
A company required to be audited should appoint an external auditor no later than three months after incorporation. Private companies eligible for audit exemption do not need to appoint an auditor, but they should confirm their status and any documentation required.
Who can act as an external auditor in Singapore?
An external auditor must be a practising public accountant or an audit firm registered in Singapore with the appropriate practising certificate and registration. Verify the auditor’s registration before appointment.
Can a private company waive the audit requirements?
Audit exemptions are available for qualifying small companies under the Companies Act, subject to meeting the prescribed criteria. In some circumstances, shareholders may need to approve a waiver or confirm that the company is dormant. Seek professional advice to confirm eligibility.
What happens if a company fails to appoint an auditor when required?
Failure to appoint an auditor may lead to non‑compliance with the Companies Act and potential penalties. It can also delay IRAS tax filings, affect bank covenants and impede fundraising. Promptly seek professional support to regularise the appointment and filings.
Key takeaways
- Determine whether your company is required to appoint an external auditor under the Companies Act and ACRA rules.
- Private companies that qualify as “small” may be eligible for audit exemption, but confirm eligibility and documentation requirements.
- Appoint an auditor within three months of incorporation when no exemption applies, and ensure the auditor is properly registered.
- Lodge appointments and changes through the ACRA BizFile+ portal and use audited accounts for IRAS and stakeholder reporting as needed.
- A corporate secretary can coordinate appointments, filings and liaison with auditors to maintain compliance.
Requirements may change, so always check the latest guidance from ACRA, IRAS or MOM, or consult a professional adviser.
If you would like to find out more about how Raffles Corporate Services can assist with your company’s compliance and corporate secretarial requirements, please get in touch with the team at [email protected].
Yours sincerely,
The editorial team at Raffles Corporate Services
Disclaimer: This does not constitute legal advice. If you require legal advice, please contact a lawyer.