Audit Exemption For Small Businesses in Singapore: Criteria & Benefits

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For larger corporations, this practice is crucial due to their complex operations and extensive financial transactions. However, for small businesses, especially startups, the cost and effort associated with audits can be substantial, potentially diverting resources from core business activities.


To support the growth of small businesses and encourage entrepreneurship, Singapore’s regulatory framework includes provisions for audit exemption. The Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA) jointly oversee the criteria and guidelines for this exemption, providing eligible businesses with relief from the mandatory audit requirement.


Criteria for Audit Exemption:

The criteria for audit exemption in Singapore are primarily defined by the size and nature of the business. The key qualifying criteria include:


  • Revenue Threshold: To be eligible for audit exemption, a company must meet specific revenue thresholds. For a private limited company, the threshold stands at SGD 10 million in annual revenue. The company must also fulfill this criterion in its immediate past two consecutive financial years.
  • Total Assets: Another determinant is the total assets of the company. To qualify for audit exemption, a company’s total assets should not exceed SGD 10 million as of the end of the financial year.
  • Shareholder Composition: Companies seeking audit exemption should have no corporate shareholders. If there are corporate shareholders, they must be dormant entities or part of a group where the parent company prepares consolidated financial statements and is itself exempt from audit.
  • Number of Shareholders: A company can qualify for audit exemption if it has fewer than 20 shareholders. The count includes both individual and corporate shareholders.
  • Fulfillment of Filing Requirements: The company should have timely filed its annual returns and financial statements for the preceding financial year. Compliance with these filing obligations is essential for maintaining eligibility.


Benefits of Audit Exemption:

Obtaining audit exemption can yield several advantages for small businesses:


  • Cost Savings: Audits can be costly, especially for small businesses with limited financial resources. Audit exemption frees up funds that can be reinvested in the business to drive growth and innovation.
  • Administrative Ease: Audits require a significant amount of documentation and administrative effort. Exempted businesses can redirect their time and resources towards core business activities.
  • Confidentiality: Audits involve the scrutiny of financial records by external parties. Audit exemption allows companies to maintain greater confidentiality over their financial information.
  • Business Focus: Small businesses can focus on their strategic goals, operational efficiency, and customer service, without the distraction of audit preparations.
  • Flexibility: Exempted businesses have more flexibility in managing their financial reporting processes. This can be particularly advantageous for startups, which often experience rapid changes in their financial structure.


Application Process:

To benefit from audit exemption, eligible businesses are not automatically exempted from audits. They need to file a declaration of eligibility with ACRA, confirming that they fulfill the necessary criteria. This declaration, once approved, can be used for successive financial years as long as the eligibility criteria are consistently met.


Contact a tax agent in Singapore to know more about audit exemption for small businesses. 

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