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Auditors: The Role They Play
As in other countries around the world, auditing plays a crucial role in maintaining transparency and trust in a company’s financial reporting in Singapore. Auditors are professionals who review and examine a company’s financial statements to ensure they are accurate and comply with regulations. Furthermore, they help ensure that the financial information presented to stakeholders is reliable and free from significant errors or fraud. Additionally, with Singapore’s strong emphasis on financial integrity and regulatory compliance, auditors are key in upholding these standards and supporting the overall health of the business environment.
When Does The Role of Auditor Come into the Picture?
The following situations demand the role of an auditor.
The Law on Requirements of Auditors
According to the Companies Act, a company must appoint an auditor three (3) months after its incorporation.
Further, it is stated that every company must get its financial statements and accounting records audited by an auditor on an annual basis unless the company meets the Singapore audit exemption requirement.
Regulatory Bodies in Singapore
The Accounting and Corporate Regulatory Authority (ACRA)
The Accounting and Corporate Regulatory Authority (ACRA) is the key regulator for corporate entities, public accountants, and corporate service providers by the Singapore government. Its main roles include:
- Regulation and Oversight: ACRA oversees the compliance and conduct of companies and their financial reporting practices.
- Legislation Enforcement: It enforces laws and regulations to uphold the public interest, ensuring transparency and trust in Singapore’s business environment.
- Financial Reporting Standards: ACRA is responsible for implementing and enforcing financial reporting standards to maintain accurate and reliable financial information.
The Inland Revenue Authority of Singapore (IRAS)
The Inland Revenue Authority of Singapore (IRAS) is responsible for:
- Tax Administration: IRAS handles the administration, assessment, collection, and enforcement of taxes in Singapore.
- Tax Policy: It plays a key role in shaping and implementing tax policies, ensuring that tax laws are effectively applied.
- Compliance and Revenue: IRAS ensures that businesses comply with tax regulations and contribute appropriately to the national revenue.
The Singapore Financial Reporting Standards (SFRS)
The Singapore Financial Reporting Standards (SFRS) provides:
- Guidelines for Financial Statements: They provide a framework for how companies should prepare and present their financial statements, ensuring consistency and accuracy.
- Uniformity and Reliability: By standardizing financial reporting, SFRS makes it easier for investors and stakeholders to understand and compare financial statements across different companies.
- Alignment with IFRS: SFRS aligns with International Financial Reporting Standards (IFRS), which helps maintain Singapore’s reputation as a transparent and reliable financial hub, supporting international business and investment.
Who Requires An Audit
| Type of Company | Process |
|---|---|
| Public Companies | All must undergo annual audits without exception to ensure transparency and protect shareholder interests |
| Large Private Companies | Required to be audited if they meet at least two of the following criteria for two consecutive financial years:
|
| Small and Exempt Private Companies | Refer to Exception from Audit below |
Exemption from Audit
In 2014, the Companies Act amended the audit exemption criteria for companies and introduced the concept of a “small company”. Hence, small companies are not required to appoint an auditor or have their accounts audited. The Amended Act took effect on July 1, 2015. Moreover, small companies and exempt private limited companies may qualify for audit exemptions if they meet at least two of these three criteria:
- Revenue not exceeding SGD 10 million for the financial year.
- Total assets not exceeding SGD 10 million at the end of the financial year.
- Number of employees not exceeding 50.
Dormant Companies: A company that has been dormant throughout the financial year (i.e., has not carried on any business activity) and has not been subject to certain other conditions may be exempt from audit.
Group Company Audits
Holding companies and their subsidiaries can also be exempt from audit compliance if they qualify as a small group. Thus, to qualify for audit exemption, the group (comprising all the companies) should fall under two of the three criteria listed above for small companies.
What are the Implications of Being Exempt from Audit?
Being exempt from audit means that the company does not need to appoint an auditor to review its financial statements. However, it still must prepare accurate financial statements that comply with the Singapore financial reporting standards. In addition, this exemption allows small companies to reduce their administrative burden while ensuring that they maintain proper accounting practices.
Role of An Auditor
The role of an auditor in Singapore includes:
- Ensuring and watching over your company’s integrity and accountability;
- Scrutinising your financial reporting;
- Safeguarding your company against frauds, errors, and risks; and
- Providing objective assurance that your company is adhering to the rules and regulations.
Approved Auditors
Before appointing any form of accounting services in Singapore, ACRA must register and approve accounting firms or public accountants before they can audit a company’s financial statements. Auditors must conduct the audit following Singapore Standards on Auditing (SSA) and other regulations to provide an opinion on the financial statements.
Timeframe: How Long Does An Audit Take?
The timeframe for an audit largely depends on the size and complexity of your business. An audit firm typically determines this after an initial consultation.
FAQs
The requirement is the same for both Singaporean and foreign companies. A foreign company is exempt from audit if they fulfill criteria for audit exemption.
Annual Financial Audits are processes involving the examination of a company’s financial statements by a licensed auditor or public accountant every year. According to the Singapore Company Act, private limited companies operating in Singapore are required to undergo an Annual Financial Audit.
Auditing services are professional services that provide compliant financial statements and ensure that the finances are in order before communicating to key stakeholders.
The timeframe for auditing is very dependent on the capacity and complexity of your business. It is usually derived after initial consultation with the audit firm.
