Audit Exemption for Small Companies and Small Groups in Singapore

As a part of the recent amendments in the Singapore Companies Act, a significant number of companies that previously required audit will no longer do so

The change takes effect for the financial year starting on or after the 1st of July
2015.

Previous Audit Provisions	New Provisions
All non-dormant companies that either had a corporate shareholder, had more than 20 shareholders or its Annual Revenue > SGD 5M required an audit.	All Private companies that meets the definition of “Small Company “and are part of “Small Group” in each of immediate past 2 financial year are exempt from audit.

If not part of a group (small company)
Criteria: – Revenue < SGD 10M – Assets < SGD 10M – Employees < 50	Must satisfy any 2 out of the following 3 conditions for the past 2 years.

If part of a group (small company)
The company itself must be a small company (as per above points)	Entire group must be a “small group” on consolidated basis
	Entire group satisfy any 2 out of the 3 criterias for past 2 years.

Transitional Provisions for existing companies

Illustration

Assumption:

a) The company is a private company throughout the period

b) The company’s FY.2015 commences on or after the 1st of July 2015

Two scenarios to illustrate transitional provisions

Scenario 1	FY 2015	FY 2016	FY 2017	FY 2018	FY 2019	FY 2020
Meets Quantitative Criteria	Yes	No	`Yes	No	No	Yes
Qualifies as a “Small Company”	Yes	Yes	Yes	Yes	Yes	No
Remarks	FY 2015 is the first financial year after the commencement of the “small company” criteria, the company qualifies as a small company.	As the company already qualified as “small company” in FY 2015, it continues to be a “small company” despite not meeting the quantitative criteria in FY 2016. It will only be disqualified when it fails to meet the criteria for 2 consecutive financial years preceding FY 2016	The company already qualified as a small company in FY 2015 and it is not disqualified.	As the company already qualified as a “small company” in FY 2015, it continues to be a “small company” despite not meeting the criteria in current FY and for one of the two preceding FYs		Although the company meets the criteria in Current FY but not in the preceding 2 FY’s, hence it is disqualified.

Two scenarios to illustrate transitional provisions

Scenario 2	FY 2015	FY 2016	FY 2017	FY 2018	FY 2019	FY 2020
Meets Quantitativ e Criteria	No	Yes	Yes	No	No	Yes
Qualifies as a “Small Company”	No	Yes	Yes	Yes	Yes	No
Remarks	FY 2015 is the first financial year after the commencement of the “small company” criteria, the company does not qualify as a small company as it does not meet the quantitative criteria in FY 2015.	FY 2016 is the second FY after the commencement of the “small company” criteria, the company qualifies as a small company as it is a private company and meets the quantitative criteria. In FY 2016.	The company already qualified as a small company in FY 2016 and it is not disqualified.	As the company already qualified as a “small company” in FY 2016, it continues to be a “small company” despite not meeting the quantitative criteria in current FY and for one of the two preceding FYs		Although the company meets the quantitative criteria in Current FY, it is disqualified as it fails to meet the quantitative criteria for two consecutive financial years preceding FY 2020.

A new company incorporated on or after 1st Jul 2015 can qualify as a “small company” if it is a private company and meets the quantitative criteria in its first or second FY after incorporation.
The illustration for this scenario is similar to that for the transitional provisions for existing companies above.

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