Company audits are very important because they ensure that the financial statements of the company are authentic. Therefore, the company Act (CA) interprets requirements relating to huge aspects of company audits, like the appointment of auditors and the companies that are left out of audit requirements. This blog post hits more on the issue.
Appointment of auditors
The directors of a particular company will have to appoint a minimum of one accounting entity to assume the role of the company auditor within the duration of three months of the company’s incorporation. In a city such as Singapore, the only entities who can act as company auditors are public accountants or accounting firms confirmed by the Accounting and Corporate Regulatory Authority (ACRA). Auditors will not assume office right from the time they are appointed until the end of the next annual general meeting (AGM) of the company.
So, when a newly incorporated firm or company appoints an auditor, this individual will maintain the office until the end of the first AGM of the company. Then during the first annual general meeting, the company will make the necessary moves to appoint a new accounting entity or may choose to retain the services of the old entity as the auditor of the company. This newly appointed auditor will then hold the position until the next annual general meeting of the company, and it goes on like that.
If an auditor is not appointed by the board of directors, any member of the company can apply to ACRA to have the body appoint an auditor for the company.
Role of an auditor
An auditor from an audit firm in Singapore, or a general auditor has diverse roles. The roles of these auditors are to give reports on if the financial statements of the company:
- Is in accordance with financial reporting standards; and
- Give an authentic view of the performance and the financial position of the company.
Auditors also offer companies and organizations their payroll services which is aimed at ensuring accuracy. Auditors are given free access to the accounting records of the company so as to obtain necessary information that may prove to be useful for audit purposes.
Exemption from audit requirements
Companies that are known as “small company” for a certain financial year, or are dormant, are left out from audit requirements. These companies do not require the services of an auditor; neither do they need their financial statements to be audited for that year.
Small company exemption
In general, one can regard a company as a “small” if it remains a private company for the current financial year and it completely meets any two of the following criteria for each of the two financial years immediately prior to the current financial year:
- The annual revenue of the company must not surpass $10 million;
- The value of the entire asset of the company must not surpass $10 million or
- The Company doesn’t have over 50 employees.
Exemption for small companies that are among the group
Small companies that are among the group (whether as the subsidiary, or as the parent company) will only be left out from audit requirements if they belong to a “small group”. For a certain group of company to be known as a “small group”, it has to meet any of the two criteria for each of the 2 following years prior to the current financial year:
- The consolidated revenue of the group must not surpass $10 million;
- The value of the group’s consolidated accumulated assets doesn’t surpass $10 million; or
- The group doesn’t have over 50 employees.
A company will also be left out from audit requirements if:
- It has been dormant from the time of its inception; or
- It has been dormant since the end of the past financial year
A company can be said to be dormant during a time when financial transactions do not happen.
Dormant companies will cease to bear the name “dormant” immediately financial transactions happen.
Exemption from audit requirements
Even if a certain company is left out or exempted from audit requirements, the registrar may still need the company to place it audited financial statements including an auditor’s report if the registrar is contented that the company has broken laws relating to the:
- Maintaining financial records (section 199 of the CA); or
- Laying its financial statements at its annual general meeting
If you reside in Singapore, you can get the help of an auditor by contacting an audit firm in Singapore. For more information on the requirements and exemptions for business audit in Singapore, please feel free to get in touch with us.