How to Do Company Accounting Audit in Singapore? Reveal the Process Key Details!

How to Conduct Company Accounting Audits in Singapore Uncovering the Secrets and Processes Behind It

In the context of global economic integration, Singapore has attracted a large number of international companies to establish headquarters or branches there due to its superior geographical location, stable environment, and transparent and efficient business system. For any company registered in Singapore, compliance is the foundation for long-term development, and annual accounting audits are a crucial part of that process.

1. Why Is an Accounting Audit Necessary?

According to the Singapore Companies Act and regulations set by the Accounting and Corporate Regulatory Authority ACRA, all private limited companies incorporated in Singapore are required to submit audited financial statements annually - unless they qualify for small company exemptions.

A small company is defined as one with

Annual revenue not exceeding SGD 10 million,

Total assets not exceeding SGD 10 million,

And fewer than 50 employees.

Even so, many companies still choose to undergo audits voluntarily. This practice not only enhances the credibility of financial information but also builds confidence among investors, banks, and other stakeholders regarding the company’s operations. Audited financial statements from independent third parties are often essential documents when applying for financing, participating in tenders, or preparing for an IPO.

2. Who Can Perform the Audit?

In Singapore, only public accounting firms licensed under the Public Accountants Act are qualified to perform statutory audits of financial statements. These firms are typically composed of Certified Public Accountants CPAs or Association of Chartered Certified Accountants ACCA members who must adhere to standards set by the Singapore Institute of Directors and Business SIDB and follow International Standards on Auditing ISA.

With the growing number of SMEs in recent years, more mid-sized and boutique accounting firms have emerged, offering cost-effective services. Meanwhile, the Big Four - PwC, Deloitte, EY, and KPMG - continue to dominate the high-end market, particularly among multinational corporations and listed companies.

3. The Audit Process Explained

The annual audit process for Singapore-based companies generally consists of the following stages

1. Preparation Phase

Auditors communicate with company management to understand the business model, financial systems, and internal control mechanisms. This phase also involves collecting necessary financial documents such as ledgers, bank statements, invoices, and contracts.

2. Fieldwork

Audit teams visit the company's premises to conduct on-site reviews. This includes random checks of bookkeeping entries, physical inventory counts, income confirmation tests, and expense reasonableness analysis. Auditors also assess whether the company’s internal controls are adequate and identify any potential risks.

3. Adjustments and Report Writing

After completing the preliminary audit, auditors may suggest adjustments to better reflect the company’s true financial position. Then, they issue a formal audit report, which can include

Unqualified opinion clean,

Qualified opinion,

Adverse opinion,

Or disclaimer of opinion - depending on the severity of issues identified.

4. Submission to Authorities

The final audit report must be submitted along with the annual financial statements to ACRA and the Inland Revenue Authority of Singapore IRAS to fulfill annual reporting obligations.

4. Secrets Behind the Audit You Might Not Know

Although the audit process appears standardized, several important yet often overlooked details exist

1. Auditing Is More Than Just Numbers

Many entrepreneurs believe auditing is simply about checking figures. In reality, the core of auditing lies in verifying the authenticity and fairness of financial information. Auditors not only examine numbers but also evaluate the business context and the reasonableness of transactions.

2. Internal Controls Affect Audit Efficiency

A strong internal control system can significantly reduce audit time and costs. For example, if a company has robust procurement approval processes, inventory management systems, and financial review procedures, auditors can work more efficiently during sampling inspections.

3. Timing Matters

Singapore companies must complete their audits and file annual reports within 18 months after the fiscal year ends. Therefore, planning the audit timeline in advance is critical. Delaying until the last minute could result in missed deadlines, leading to penalties or even deregistration.

4. Choosing the Right Audit Firm Is Crucial

Different businesses should select audit firms based on their specific needs. Large enterprises may prioritize expertise and service scope, while startups might focus more on cost-effectiveness. Recent news highlights how some SMEs suffered setbacks in subsequent fundraising due to poor audit quality caused by choosing overly cheap services.

5. Beyond Compliance Value-Added Benefits of Audits

While audits are a mandatory compliance requirement, they also offer additional value to businesses

Identifying Potential Risks The audit process helps uncover weaknesses in financial management, allowing timely corrections.

Improving Financial Management Expert advice from auditors can help optimize financial processes and improve operational efficiency.

Building External Trust A high-quality audit report strengthens trust among partners, investors, and customers regarding the company’s financial health.

Conclusion

In summary, accounting audits for Singapore-based companies are not just legal obligations but also vital tools for self-assessment and improved corporate governance. Understanding the audit process, prioritizing audit quality, and selecting the right audit firm will help businesses navigate the competitive market landscape with greater stability and confidence.