Most of the time, when it comes to the time to file for audit reports. Auditing is important for ensuring that there is good governance and responsible management of finances and resources. The audits conducted need to be independent in order to get a clear representation of what is really going on. This also helps to prevent any conflict of interest from interfering in the process. Below is an insight with this regard.
The requirement governing the auditing of companies in Singapore depends on what the company was registered as by the ACRA. All the companies that must have a compulsory audit done must have annual revenues above S$ 5 million. But, for those that are below this expected revenue, they still have to keep maintaining all the relevant records for accounting. The financial statements must comply with the Financial Reporting Standards (FRS). These standards must be those that are prescribed by the Council on Corporate Disclosure and Governance.
The audited reports must be prepared under the following conditions. The first one is if the company has any corporate shareholder. The presence of a corporate entity as a shareholder means that there is need for ensuring that all accounts are being managed well. The second considerate is the annual revenue; it must exceed S$5 million. This is because editing can be a very expensive project; there is no need to stress the so called small companies. Where there are more than 20 shareholders, there is need to do audits on all the accounts.
The audits also depend on whether the company is solvent or insolvent. A solvent company is one that has the ability to cater for their debts by the time that the debt is due to be paid. On the contrary, insolvent companies are those that are unable to cater for their debts by the time the debts are due to be cleared. This helps in giving these companies that are insolvent the proper time and more finances to be used in their operations rather than on conducting audits.
Exempt private companies (EPC)
Private companies in Singapore are all considered as independent legal entities. Therefore the actions carried out by the management of these companies can lead to the company itself being sued. This is not considering the people running it. But, the company will be liable in case they fail to follow audit regulations required by the government. This also means that shareholders cannot be held accountable for any debts or in case a company incurs losses.
These are private companies with annual revenue of S$5 million or less. If the revenue for the year exceed the S$ 5 million then the audit becomes compulsory. These companies need not to have more than 20 shareholders. This is a regulation set by the government. All the shareholders in these companies must be individuals and not corporations. In case there is a corporate shareholder, at least one of the shareholders needs to be an individual. This individual must have shares less than 10% of the available shares . For the solvent companies in this category, the accounts must be audited but they do not need to attach the accounts. However, they must still fill out an online declaration of solvency. Without filling this declaration of solvency, there can be legal repercussions for the company. For the insolvent EPC, the accounts must be audited, but there is need to file the accounts.
These are companies that do not have any active accounting transactions going on in their accounts. For the solvent dormant EPC, there is no need for them to have their accounts audited. They will also not be required to attach their accounts, but they will need to fill out and complete online declaration of their solvency. For insolvent dormant companies, there will be no need to audit the accounts and the accounts must be filed.
Non –exempt Private Companies
These are companies which are limited by shares. The number of shareholders in these companies need to be more than 20 .but the maximum number of shareholders is limited to 50. Most of these companies are solvent. For the active ones, the accounts must all be edited and they must also be filed. The dormant ones do not need to be audited; however they must file all the accounts.
Public companies are companies that carry out Corporate Social Responsibility activities. These activities are done in the interest of the national government or the public. Public companies can either be listed on the stock exchange, or they may also choose not to be listed. Such companies have the ability to raise capital through offering shares to the public. The number of shareholders in these companies can be more than 50. They are usually listed as a company on the SGX and are limited by the shares.
These companies are mostly solvent. The active ones in terms of accounting transactions must have their accounts audited. All their accounts need to be filed. For the dormant ones, there is no need for audit but all the accounts must be filed. It is important to note that private companies enjoy a lot of freedom and can easily obtain loans from banks and other financial institutions. There are also measures put to ensure that private companies get more revenue. One such measure is by giving these companies tax exemptions for the first S$ 100,000.
It is important to note the above since in cases where people do not know where their companies stand. They end up conducting unnecessary audits or even handing in information that is not required. Others also end up ignoring the process and this leads to serious implications. Always note that whenever the revenue exceeds S$ 5 million, this is a ground for compulsory audit, no matter the nature of the company. Only dormant accounts are completely exempted from auditing. This is because they will not have any changes in terms of accounting information. The audits need to be done in good time, and they must be based on the real situation in the companies. This is an insight.