Why Must Singapore Companies Appoint Local Auditors? Unveiling the Reasons and Implications

Why Must Singapore Companies Hire Local Auditors? Uncovering the Truth and Significance

In today’s era of global economic integration, cross-border business operations have become the norm. As one of the most competitive financial hubs in Asia, Singapore attracts a large number of foreign enterprises due to its transparent legal framework, efficient business environment, and stable tax policies. However, a seemingly strict requirement often draws attention from abroad why must companies registered and operating in Singapore hire auditors who are locally registered? This requirement is not arbitrary, but rather rooted in the rigor of Singapore’s financial regulatory system and its emphasis on protecting public interest. This article will analyze the truth and significance behind this regulation, incorporating recent news and industry developments.

1. Legal Framework The Foundation of Compliance

Singapore’s corporate audit system is governed by the Companies Act and regulations set by the Accounting and Corporate Regulatory Authority ACRA. According to current laws, all companies registered in Singapore-unless they qualify for specific exemptions such as small private companies-must submit audited financial statements annually, conducted by auditors registered with and approved by ACRA.

This regulation ensures the professionalism and traceability of audit work. Local auditors are not only familiar with Singapore’s accounting standards, such as the Singapore Financial Reporting Standards SFRS, but are also required to adhere to ethical codes and auditing standards established by regulatory bodies like the Singapore Accountancy and Corporate Regulatory Authority SAICA and the Institute of Singapore Chartered Accountants ISCA. These standards provide a solid foundation for financial transparency.

2. Regulatory Requirements Building Trust and a Culture of Compliance

The Monetary Authority of Singapore MAS and ACRA have continuously tightened oversight on corporate financial reporting in recent years. In a 2025 report, MAS pointed out that over the past three years, several cases of investor losses were caused by financial fraud or audit negligence, with some issues stemming from auditors lacking local qualifications or sufficient knowledge of local regulations.

For example, in July 2025, a tech company listed in Singapore saw its stock price plummet after its financial statements were found to contain material errors. Investigations revealed that the auditor, though licensed overseas, did not fully understand Singapore’s disclosure requirements and failed to detect critical risk points. This incident led regulatory authorities to question the professional capabilities of non-local audit firms.

Mandating the use of local auditors is essentially a move to build a high-standard, trustworthy system of financial disclosure, which is vital for maintaining Singapore’s reputation as a global financial center.

3. Operational Efficiency Enhancing Communication and Risk Control

From a practical standpoint, hiring local auditors also improves audit efficiency and communication. Local accounting firms typically have deep knowledge of Singapore’s tax system, industry practices, and corporate structures, enabling them to identify potential risks more quickly and offer tailored advice.

Moreover, local auditors are subject to regular quality inspections by ACRA, ensuring they maintain professional standards. This institutional design not only enhances audit quality but also strengthens the trust between companies and regulatory authorities.

4. Localized Strategy in a Globalized Economy

Despite being a highly open economy, Singapore emphasizes localized execution within a global context. This means that even if a company is part of a multinational group, it must comply with local regulatory requirements when operating in Singapore. This approach is not limited to auditing but also applies to areas such as tax reporting, human resources management, and data protection.

By reinforcing local compliance, Singapore ensures the stability and predictability of its market environment, which in turn attracts more international capital and businesses.

5. Positive Impact on Businesses

While hiring a local auditor may increase short-term costs, in the long run, this practice helps companies build a strong compliance culture and governance structure. During key processes such as IPOs, fundraising, or mergers and acquisitions, reports issued by reputable local auditing firms often enhance investor confidence and reduce financing costs.

As ESG Environmental, Social, and Governance reporting becomes a global trend, local auditors in Singapore are also expanding their service offerings to assist companies with emerging needs such as sustainability reporting. Their agility and responsiveness often surpass those of international firms.

Conclusion

Singapore’s mandatory requirement for companies to hire local auditors is not driven by protectionism, but rather by a comprehensive consideration of financial transparency, risk control, and regulatory efficiency. In an era of increasingly stringent global regulation, this system not only safeguards market order but also provides strong support for the long-term growth of businesses. For companies aiming to establish a solid presence in Singapore, selecting a professional and compliant local auditor is the first step toward success.