Statutory auditing, mandated by the Singapore Companies Act, is a key component of corporate governance designed to ensure transparency in financial reporting. By complying with statutory audit standards, companies can identify and resolve potential financial discrepancies, and most importantly, avoid penalties. This article will share what businesses need to know about statutory audit requirements in Singapore, including how to choose the right auditor and the consequences of non-compliance.
Overview of a Statutory Audit
A statutory audit is an official examination of a company’s financial records, conducted by a licensed auditor. Unlike optional audits, it is required by law to ensure that a company’s financial statements accurately reflect its financial position. It also fosters trust and credibility among stakeholders, regulators, and the general public.
Under the Singapore Companies Act, every registered company is mandated to undergo a statutory audit annually. This involves having the company’s financial statements reviewed by an auditor accredited by Singapore’s Accounting and Corporate Regulatory Authority (ACRA). This annual process offers an unbiased assurance that the financial records comply with relevant financial reporting standards, providing a true and fair view of the company’s finances.
Who Must Undergo a Statutory Audit?
Statutory audits are required for:
- All public companies
- Private companies that meet specific thresholds
Typically, small private companies with annual revenue below SGD 10 million, fewer than 50 employees, and less than SGD 10 million in total assets are exempt from this requirement.
For larger companies, statutory audits are mandatory and should be deemed an opportunity to strengthen internal controls and improve financial reporting.
Choosing a Statutory Auditor in Singapore
Selecting the right auditor is crucial for meeting your audit requirements in Singapore. Directors must appoint an auditor within three months of the company’s incorporation from ACRA’s list of registered public accountants. Consider the following qualities when choosing a statutory auditor in Singapore:
1. Experience and Expertise
Look for one with a proven track record in your industry. A well-versed auditor can provide tailored insights, helping your business address industry-specific compliance challenges.
2. Reputation
A reputable auditor with a history of ethical standards enhances the credibility of your company’s financial statements. Ensure your auditor is certified as a chartered accountant in Singapore to guarantee they meet the necessary qualifications.
3. Independence
Independence is the key to maintaining objectivity. The chosen audit firms in Singapore should be free from any conflicts of interest, presenting an unbiased assessment of your company’s financial records.
Statutory Audit Penalties in Singapore
Compliance with statutory audit requirements in Singapore is not optional. Singapore’s Companies Act specifies strict timeframes for appointing and notifying the Registrar about your company’s auditors.
Failure to comply with these statutory requirements can result in financial and reputational consequences. Notably, statutory audit penalties in Singapore potentially damage your company’s reputation.
According to Section 173A of the Act, companies must:
- Notify the Registrar within 14 days of appointing an auditor.
- Inform the Registrar within 14 days of any changes in the appointed auditor.
- Failure to appoint an auditor on time, or to submit accurate financial statements, is a serious offence.
Under Section 173H of the Companies Act, directors or other company officers who default may face penalties of up to SGD 5,000, along with a default penalty for continued non-compliance.
Situations Requiring ACRA’s Consent for Auditor Resignation
An auditor is required to apply for ACRA’s consent if he wishes to resign as auditor of:
(a) a public interest company [1]; or
(b) a Variable Capital Company (VCC) [2]; or
(c) a subsidiary company of a public interest company or a VCC, and the resignation is before the end of the term of office for which he was appointed.
The legislative provisions for such premature resignations are set out under sections 205AB to 205AF of the Companies Act 1967 and section 108 of the Variable Capital Companies Act 2018, in relation to companies and VCCs respectively.
For broad guidelines on such premature resignations, please refer to Practice Direction No. 4 of 2015: Resignation of Auditors of Public Interest Companies or their Subsidiaries in relation to Sections 2015AB to 205AF of the Companies Act, Chapter 50 issued on 27 May 2015.
Partnering with Qualified Accountants in Singapore
While statutory audits focus on financial statements, your company’s ongoing financial health depends on solid annual financial records. Engaging qualified accountants in Singapore can help you stay organised and well-prepared for these documents.
Whether you’re choosing an auditor or preparing for an annual audit, understanding the aforementioned statutory requirements is vital to protect your business from potential legal repercussions. Partner with Credo Assurance today to keep your financial statements audit-ready.
Contact us and let us help you navigate your statutory audit process with confidence.
