Singapore Audit Requirements: Is Your Startup Eligible?

Launching a startup in Singapore is a thrilling step forward, filled with bold ideas, enthusiastic teams, and a clear drive to disrupt or innovate. Once the business plan is set and the first rounds of funding are in, the next priority is ensuring that your business complies with Singapore’s regulatory framework, particularly when it comes to financial reporting and audits. 

One critical question arises for many founders: Does my company need an audit? While it’s easy to assume that audits are something only large corporations must worry about, Singapore audit requirements are more nuanced. In reality, many startups in Singapore qualify for audit exemption under the Companies Act, but eligibility depends on several financial criteria.

Even if exempt, should your startup voluntarily undergo an audit? In this comprehensive guide, we explain everything you need to know about Singapore audit requirements—from eligibility criteria to strategic benefits, and even common misconceptions.

Key Takeaways:

• Singapore audit requirements are based on the Companies Act and apply to all registered businesses in the country.
• Many startups qualify for audit exemption Singapore, provided they meet the small company criteria.
• Startups must reassess their exemption eligibility every year.
• Even exempt companies must prepare proper financial statements and meet Inland Revenue Authority of Singapore (IRAS) tax filing obligations.
• Voluntary audits can provide significant business benefits—including improved credibility, better financial controls, and easier access to funding.

Audit Requirements: Who Needs One, Who Doesn’t

Understanding Singapore’s Audit Rules

All businesses in Singapore are required to prepare and maintain proper financial statements. This requirement applies regardless of business size, revenue, or industry. However, not all companies need to undergo an audit. That’s where Singapore audit requirements come into play.

According to the Companies Act, Singapore audit requirements state that only certain businesses must appoint external auditors to verify their financial statements. These criteria were designed to reduce the compliance burden for smaller companies while maintaining transparency and accountability among larger entities.

Let’s break it down:

• All companies must keep financial records: Every company must prepare financial statements in accordance with the Singapore Financial Reporting Standards (SFRS).
• Not all require external audits: If a business qualifies under the small company audit criteria, it may be eligible for audit exemption in Singapore.
• Certain companies are always audited: Public companies, financial institutions, and those operating in regulated industries must be audited regardless of size.

These audit obligations are grounded in legislation and are not arbitrary. They are clearly defined in law and enforced by regulatory bodies such as the Inland Revenue Authority of Singapore (IRAS) and the Accounting and Corporate Regulatory Authority (ACRA).

Audit Exemption Criteria for Startups

Startup founders are often relieved to learn that they may not need an audit, especially in the early years when resources are stretched thin. However, audit exemption is not automatic. A company must qualify based on the small company audit criteria, and this status must be reassessed each year.

To be exempt under Singapore audit requirements, a private company must meet at least two of the following three conditions for the past two consecutive financial years:

• Annual revenue does not exceed SGD 10 million: This refers to the total income earned before deducting any expenses.
• Total assets do not exceed SGD 10 million: This includes all business-owned assets such as cash, inventory, property, and equipment.
• No more than 50 employees: This number includes both part-time and full-time employees on payroll.

If your startup satisfies at least two of these three criteria over two consecutive financial years, it qualifies for audit exemption.

However, if your startup grows and crosses any of these thresholds for two years in a row, it will be mandated to undergo audits under Singapore’s audit requirements.

Common Misconceptions About Audit Exemptions

Let’s debunk some common myths that startup founders often believe about Singapore audit requirements and audit exemption:

“Audit exemption means I don’t need to keep financial records.”

Incorrect. Even exempt companies must maintain financial statements and comply with tax filing rules set by the Inland Revenue Authority of Singapore (IRAS). Skipping this step can result in fines and operational issues.

“Once exempt, always exempt.”

False. Your company’s eligibility for audit exemption in Singapore is reassessed annually. Failing to meet the exemption criteria for two consecutive years triggers a mandatory audit.

“Only micro-businesses are exempt.”

Not always. Dormant companies and certain company structures can qualify, even if they don’t meet the standard small company audit criteria.

“Audits only matter for legal compliance.”

In reality, audits strengthen internal governance, boost investor trust, and uncover financial discrepancies.

“Audit exemption means no oversight.”

Even without an official audit, your business may still undergo financial reviews from investors or agencies like IRAS.

Should Your Startup Consider an Audit Even If It’s Exempted?

Benefits of an Audit for Exempt Startups

Even if your startup meets the small company audit criteria and qualifies for audit exemption, a voluntary audit could be a smart strategic move.

Here’s why:

Investor and Lender Confidence

An independent audit enhances the reliability of your financial statements, making your business more attractive to potential investors and lenders.

Early Detection of Financial Irregularities

Audits help uncover issues like misstatements, fraudulent activity, or poor bookkeeping—before they escalate into serious financial or legal problems.

Smoother Tax Filing

Verified financials make compliance with Singapore audit requirements and IRAS submissions easier, minimising disputes or penalties.

Improved Governance and Control

Audits promote internal discipline, helping startups refine their budgeting, reporting, and accounting systems. This is particularly useful when using professional accounting services for small businesses.

Reduced Risk of Non-Compliance

Many entrepreneurs assume they’re “too small” to be noticed, but tax audits by IRAS are not limited to big firms. Having audited financials helps protect your startup during any scrutiny.

When an Audit Becomes Necessary Even for Exempt Startups

Even if you qualify for audit exemption, certain business scenarios may still necessitate an audit:

• Raising capital: Investors and financial institutions often insist on audited statements to ensure transparency before disbursing funds.
• Applying for government grants: Grants from Enterprise Singapore, productivity schemes, or R&D incentives often require audited reports to validate your financial standing.
• Mergers and acquisitions: Companies entering M&A discussions will typically be required to show audited financials during due diligence.
• Tax or legal investigations: If the Inland Revenue Authority of Singapore (IRAS) investigates your company, having audited documents expedites the process and reduces liability.
• International expansion: Many countries require companies to submit audited financial statements before allowing market entry. Early adoption of Singapore audit requirements makes international growth smoother.

Frequently Asked Questions

What happens if a company that requires an audit does not conduct one?

Ignoring Singapore audit requirements can lead to severe penalties—including fines, legal action, and regulatory restrictions. It can also undermine investor trust and limit access to funding.

Does audit exemption mean I don’t need to track my finances?

No. Exempt companies still need to prepare proper financial reports. Inaccurate or missing records can cause cash flow issues and legal consequences from IRAS.

Can banks request audited statements even if I’m exempt?

Absolutely. Lenders and investors often request audited reports to evaluate risk. Working with providers of audit services in Singapore helps build financial credibility.

How often should I reassess my audit exemption status?

Every financial year. If your business breaches the small company audit criteria for two consecutive years, you’ll need to start audits in the following year as per Singapore audit requirements.

Understanding Singapore audit requirements is vital for any startup founder who wants to build a sustainable and compliant business. While many new companies are eligible for audit exemption, eligibility is not permanent, and reassessment must happen annually.

Even when an audit is not legally required, voluntarily conducting one can bring invaluable benefits. Whether it’s improving investor confidence, supporting tax compliance, or facilitating expansion, an audit can be a tool for growth, not just a regulatory burden. For expert advice tailored to your business needs, contact Accountancy Hub, your trusted partner for audit services. We also offer comprehensive business accounting and audit solutions, helping startups stay compliant and audit-ready at every stage of growth.