Singapore's Small Company Audit Exemption May Change: What SMEs Need to Know
ACRA announced a review of Singapore's audit exemption framework in February 2026. The review is intended to consider whether the framework continues to balance corporate governance with the cost of compliance for smaller companies.
The announcement does not itself change the law. As at 3 August 2026, businesses should continue applying the existing small company criteria unless and until final changes are formally announced and take effect.
This distinction matters. A company should not cancel an audit solely because it expects the thresholds to rise.
What Is the Small Company Audit Exemption?
Singapore private companies may qualify for exemption from statutory audit if they meet the small company test.
The exemption can reduce annual compliance costs, but it does not remove the need to maintain proper accounting records, prepare financial statements, file corporate income tax returns or meet applicable ACRA filing obligations.
Audit exemption also does not prevent a company from choosing a voluntary audit where shareholders, lenders, investors or internal governance needs justify one.
Current Small Company Criteria
A company must be a private company and meet at least two of these three quantitative criteria for each of the two financial years immediately preceding the current financial year:
|
Criterion |
Current threshold |
|
Total annual revenue |
S$10 million or less |
|
Total assets |
S$10 million or less |
|
Number of employees |
50 or fewer |
For a newly incorporated company, the assessment is adapted to the financial years available since incorporation.
Employee count is based on full-time employees at the end of the financial year. Revenue and assets should be determined from financial statements prepared in accordance with the applicable accounting standards.
What If the Company Belongs to a Group?
A private company that is part of a group must generally satisfy both the company-level and group-level tests.
The entire group, including foreign entities, must meet at least two of the same three criteria on a consolidated basis for the relevant financial years.
This means a small Singapore subsidiary may still require an audit if its wider group exceeds the thresholds. Group structures should be reviewed carefully instead of assessing the local entity in isolation.
What Is ACRA Reviewing?
ACRA's 2026 review covers two main areas:
ACRA conducted targeted industry consultation from March 2026 and accepted survey feedback until 17 April 2026.
The review announcement did not specify a confirmed new threshold, effective date or transitional arrangement. Any number circulating without a later official announcement should be treated cautiously.
What Audit-Exempt Companies Must Still Do
Keep proper accounting records
Transactions, assets, liabilities, income and expenses must be recorded accurately and supported by documents. Audit exemption is not permission to keep incomplete books.
Prepare financial statements
Companies must prepare financial statements in accordance with the applicable financial reporting framework, even when an external auditor does not issue an audit opinion.
Meet ACRA filing obligations
Whether financial statements must be filed, and in what XBRL format, depends on the company's type, size and circumstances. Audit exemption and filing exemption are not the same.
File corporate income tax returns
The company must submit its ECI and annual Corporate Income Tax Return where required, supported by complete accounts and tax computations.
Maintain internal controls
Without an annual audit, management should pay particular attention to bank reconciliation, approval limits, expense evidence, payroll controls and review of balance-sheet accounts.
Respond to shareholder rights
ACRA notes that shareholders holding at least 5% of the company's total issued shares retain the right to require an audit.
When a Voluntary Audit May Still Be Useful
An eligible company may choose an audit when:
The decision should consider the intended users of the financial statements, not only the statutory minimum.
Audit Exemption vs Other Requirements
The company still calculates taxable income and files its return. IRAS can request supporting records and review tax positions.
Financial statements and ledgers are still needed. Directors require reliable financial information to discharge their oversight duties.
A dormant company may have separate audit, financial statement and tax filing considerations. Do not assume all exemptions arise from the same test.
A loan agreement, shareholder agreement, licence or investor term may require an audit even when the Companies Act does not.
How SMEs Should Prepare for a Possible Change
Until final rules are announced, determine audit status under the existing S$10 million, S$10 million and 50-employee tests.
Create an annual audit-status checklist using revenue, assets and employee headcount. Retain the calculation with the year-end records.
Subsidiaries should obtain consolidated group figures in time to assess eligibility. Foreign entities may need to be included.
Ask lenders, investors and grant administrators whether audited accounts are required independently of statute.
Even if no audit is expected, organised schedules and reconciliations make tax filing, due diligence and future audits easier.
If ACRA raises the thresholds, review the effective date and transitional provisions before changing the appointment of an auditor or the year-end timetable.
Common Mistakes
Applying only one year of figures
The existing test generally looks at the two immediately preceding financial years, not only the latest year.
Ignoring the group test
A subsidiary cannot rely only on its own small size where the group requirements apply.
Confusing employee definitions
Use the relevant ACRA basis for full-time employee headcount at financial year-end instead of a casual average or payroll headcount from another scheme.
Cancelling an audit before checking contracts
Statutory eligibility does not remove obligations agreed with banks, investors or shareholders.
Letting bookkeeping standards fall
Audit-exempt companies still need reliable accounts. Weak records can lead to tax errors, poor decisions and due-diligence problems.
Frequently Asked Questions
Have the S$10 million thresholds already increased?
No confirmed increase was stated in ACRA's February 2026 review announcement. Continue using the current rules until formal changes are announced.
Does an exempt company need an auditor?
It may not need a statutory audit, but a voluntary or contractual audit can still be required or useful.
Can shareholders request an audit?
Yes. ACRA states that shareholders holding at least 5% of total issued shares retain the right to require one.
Does audit exemption mean financial statements do not need to be filed?
Not necessarily. Financial statement filing and XBRL requirements must be checked separately.
Keep the Company Audit-Ready
The possible easing of audit thresholds may reduce costs for more companies, but it will not remove the need for accurate accounts and director oversight. Strong financial records remain essential for tax, financing, governance and growth.
JWC Accounts & HR can help businesses maintain organised books, prepare financial statements and corporate tax filings, and assess the practical accounting work that remains necessary when a company is audit-exempt.