Must an Audit Be Mandatory for Setting Up a Company in Singapore? A Deep Dive

Is an Audit Really Necessary When Setting Up a Company in Singapore? Let’s Find Out!

In the international business environment, Singapore stands out as an ideal location for many companies due to its advantageous geographical position, stable environment, and efficient legal system. However, one common question for businesses planning to operate in Singapore is whether they need to conduct an audit. This decision not only affects operational costs but also relates to corporate governance and compliance. This article will explore this issue from multiple perspectives and analyze it alongside relevant news information.

Firstly, according to Singapore's Companies Act, all registered companies in Singapore are required to prepare financial statements in accordance with legal regulations. However, whether an audit is necessary depends on the nature and size of the company. For instance, if a company qualifies as a small enterprise and meets specific conditions such as having an annual revenue of no more than SGD 5 million, total assets of no more than SGD 2.5 million, and employing no more than 50 people, it can opt to be exempt from auditing. This policy aims to alleviate the financial burden on small enterprises while encouraging more businesses to enter the market.

In recent years, with changes in the global economic landscape, Singapore has gradually adjusted its requirements for audits. For example, in 2025, the Accounting and Corporate Regulatory Authority ACRA of Singapore issued new guidelines stating that even small enterprises choosing to forego auditing must still maintain complete books and records. This change reflects the regulatory body's emphasis on transparency and accountability. As mentioned in an article in The Straits Times although exemption from auditing can save costs for enterprises, good financial records remain the cornerstone of ensuring healthy company development.

It is worth noting that even though small enterprises may choose not to undergo auditing, investors, lenders, and other stakeholders generally prefer companies that can provide audited financial reports. This is because auditing not only validates a company's financial status but also serves as a testament to its integrity and management capabilities. According to a Bloomberg survey, over 80% of foreign investors indicated that they are more inclined to collaborate with companies that have comprehensive audit reports. This preference applies not only to large multinational corporations but also to small and medium-sized enterprises.

From another perspective, auditing can also help businesses identify potential issues and make improvements. Through professional reviews by external auditors, companies can identify gaps or risk points in their financial management, allowing them to take measures to optimize internal processes. For example, a medium-sized technology company based in Singapore discovered shortcomings in cost control during its audit and subsequently adjusted its budget allocation strategy, ultimately achieving higher profit growth. Such cases illustrate that, despite the short-term costs associated with auditing, it can help companies avoid risks and enhance competitiveness in the long run.

Of course, for companies that do not meet the criteria for small enterprises, auditing is mandatory. Regardless of the size of the enterprise, failure to comply with auditing requirements may result in fines or even legal liability. When deciding whether to conduct an audit, enterprises must consider their actual circumstances and future development plans comprehensively.

In summary, whether an audit is necessary when setting up a company in Singapore depends on various factors, including the scale of the company, revenue levels, and expectations for future development. Although small enterprises can opt out of auditing by meeting certain conditions, maintaining good financial records remains the key to corporate success. At the same time, auditing not only enhances a company's credibility but also helps it better address market challenges. Whether for compliance or strategic considerations, enterprises should carefully handle the audit process.

Finally, it is recommended that enterprises seek advice from professional accountants or advisory teams before making decisions. After all, choosing the right audit solution not only satisfies legal requirements but also lays a solid foundation for the company's long-term development.