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The Accounting and Regulatory Authority (ACRA)<\/a> introduced a new concept back in July, 2015, known as the small company concept. That move followed the new reform of the Companies Act which introduced the exemption of audits for small companies.<\/p>\n<\/p>\n
What is the \u201cSmall Company\u201d Concept?<\/h3>\n
Under this new concept, companies that qualify as small companies would get to reduce their regulatory costs since they would have fewer audit requirements to comply with. Although exempted from audits, the qualifying companies would still need to provide unaudited reports for assessment.<\/p>\n
Among the exemptions included are:<\/p>\n
- \n
- Profit and loss accounts, consolidated accounts and balance sheets no longer need to be audited by an approved auditor. An approved auditor would be one that has been certified and licensed by the Institute of Singapore Chartered Accountants (ISCA)<\/li>\n
- Members of the company no longer need to be provided with copies of the auditor\u2019s report<\/li>\n
- Copies of the auditor\u2019s report are no longer needed at the Annual General Meetings<\/li>\n<\/ul>\n
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Who Qualifies as a \u201cSmall Company\u201d?<\/h3>\n
Companies would need to fulfil any two of the requirements listed below for immediate past two consecutive financial years to be deemed a small company:<\/p>\n
- \n
- Total revenue of the company is no more than $10 million<\/li>\n
- Total assets of the company are no more than $10 million<\/li>\n
- Total number of employees at the company are no more than 50<\/li>\n<\/ul>\n
Additional requirements include:<\/p>\n
- \n
- The company must be incorporated in Singapore<\/li>\n<\/ul>\n
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Statutory Obligations<\/h3>\n
Before the change took place, if a company wanted to qualify for exemptions, it had to reach a maximum threshold of $5 million. With the new upward adjustment by ACRA, at least 25,000 SMEs will be able to qualify for the audit exemption. Nevertheless, despite these audit exemptions, companies will still be required to prepare the following:<\/p>\n
- \n
- Unaudited financial statements<\/a><\/li>\n
- Maintain proper accounting records<\/li>\n
- Empower shareholders who have a minimum of 5% voting rights to require companies to prepare audited accounts<\/a><\/li>\n<\/ul>\n
Properly maintained accounting records are essential to a company, especially when ACRA has been not to conduct surprise checks periodically. Companies who may be unfortunately embroiled in legal issues may require an auditor to be appointed, which is why it is important that these accounting records be up to date.<\/p>\n
Companies would also need to ensure that their employees are equipped with the knowledge and experience to ensure that the company\u2019s profit and loss accounts and balance sheets are prepared in accordance with the requirements set force by SFRS<\/a>.<\/p>\n
As of 1st<\/sup> July 2015, when the changes came into effect, it is required that private companies meet the above criteria. This applies for the first of second half of a company\u2019s fiscal year which commences either on or after the 1st<\/sup> of July.<\/p>\n
- Unaudited financial statements<\/a><\/li>\n
- The company must be incorporated in Singapore<\/li>\n<\/ul>\n
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