Greater business flexibility to the business environment, the Companies (Amendment) Act introduce the concept of a “small company for audit exemption” and replace the current ruling where a company is exempted from auditing its accounts annually only if it is an exempt private company and has an annual revenue of S$5 million or less.
The audit exemption is applicable for financial years beginning on or after the change in the law (1 July 2015).
A company qualifies as a small company if:
- it is a private company in the financial year in question; and
- it meets at least 2 of 3 following criteria for immediate past two consecutive financial years.
- total annual revenue ≤ $10m;
- total assets ≤ $10m;
- of employees ≤ 50.
For a company which is part of a group, the company must qualify as a small company and the entire group must be a “small group”. The “small group” must meet at least 2 of the 3 quantitative criteria on a consolidated basis for the immediate past two consecutive financial years.
Where a company has qualified as a small company, it continues to be a small company for subsequent financial years until it is disqualified. A small company is disqualified if:
- It ceases to be a private company at any time during a financial year; or
- It does not meet at least 2 of the 3 quantitative criteria for the immediate past 2 two consecutive financial years.
The small group continues to be a small group for subsequent financial years until it does not meet at least 2 of the 3 quantitative criteria for the immediate past two consecutive financial years.
With the implementation of Amended Act, it reduces compliance cost for at least 25,000 small firms which currently do not qualify for audit exemption. This change still requires all firms to keep proper accounts even if there is no mandatory audit.