%20(3).jpg)
Statutory audits in Singapore come with real costs — both in fees and management time. Under Section 205 of the Companies Act 1967, all registered companies must appoint an auditor and have their financial statements audited annually.
Since 2015, however, smaller private companies have had a way out. The "small company" audit exemption, governed by Section 205C of the Companies Act and the Thirteenth Schedule, allows eligible private companies to skip this requirement entirely — potentially saving thousands of dollars in annual compliance costs.
If you're a business owner, foreign investor, or finance professional managing a Singapore-incorporated company, this guide covers exactly what you need: the qualifying criteria, how to apply the tests correctly, and what compliance obligations remain even after exemption.
Pay particular attention if you're managing a foreign-owned subsidiary within a multinational group structure. Both individual company-level and group-level tests must be satisfied — and missing either one disqualifies the exemption.
For many private companies in Singapore, audit exemption can mean thousands of dollars in saved compliance costs each year. Under Section 205C of the Singapore Companies Act, eligible companies are relieved from the statutory obligation to appoint a registered public accountant and have their financial statements formally audited annually. Companies must actively qualify for it each year — it is not granted by default, and eligibility is assessed based on specific criteria.
Before July 2015, only "exempt private companies" (EPCs) with annual revenue below SGD 5 million qualified for audit exemption. The structure was highly restrictive: no more than 20 members, and no corporation could hold any beneficial interest in shares.
This meant any company with corporate shareholders was automatically disqualified — regardless of size or revenue.
The 2014 amendment to the Companies Act introduced the broader "small company" concept, which took effect for financial years beginning on or after 1 July 2015. This reform expanded the pool of eligible businesses by:
Singapore's audit exemption framework serves three clear goals: lower compliance costs for SMEs, reduced administrative burden for qualifying companies, and alignment with international regulatory practices. According to ACRA's February 2026 press release, the framework balances easing that burden with preserving adequate corporate governance oversight.
The statutory audit requirement for larger companies remains fully intact, maintaining accountability where broader public interest and a larger stakeholder base warrant external scrutiny.
To qualify for audit exemption, a company must satisfy two conditions simultaneously:
Both conditions are mandatory. A company that satisfies the quantitative thresholds but ceases to be a private company at any point during the financial year loses its exemption eligibility entirely.
Under the Thirteenth Schedule of the Companies Act, the three thresholds are:
CriterionThresholdTotal annual revenueNot more than SGD 10 millionTotal assets (year-end)Not more than SGD 10 millionNumber of employees (year-end)Not more than 50
Revenue: Measured per financial statements prepared under applicable Singapore accounting standards, covering all operating revenue recognized during the financial year.
Total assets: The balance at year-end calculated under applicable accounting standards, including all current and non-current assets before deduction of liabilities.
Employees: Full-time headcount at year-end. Part-time and contract workers should be assessed based on their classification under applicable accounting standards — companies with significant variable workforce should verify their count carefully.
A company must satisfy at least two of the three criteria in each of the two financial years immediately before the current year. Failing to meet the criteria in even one of those two years disqualifies the company.
Practical Example:
To assess eligibility for audit exemption in FY2024:
Newly incorporated companies face a different situation — they simply don't have two years of history to evaluate.
The Thirteenth Schedule accounts for companies without a two-year track record:
On 26 February 2026, ACRA announced a review of the audit exemption framework, with industry consultations running from March 2026. The review focuses on two areas:
ACRA requested public feedback by 17 April 2026. No revised figures have been announced yet, but the review signals potential expansion of exemption eligibility in the near term.
Even if a Singapore subsidiary individually qualifies as a small company, it only receives audit exemption if the entire group also qualifies as a "small group." Both conditions must be met simultaneously.
This dual test prevents large multinational corporations from structuring small Singapore subsidiaries to avoid audit requirements while maintaining substantial consolidated operations elsewhere.
Under Section 205C(3)-(4) and the Thirteenth Schedule, Paragraph 2, the group (including foreign parent and all subsidiaries) must meet at least two of the same three criteria on a consolidated basis for two consecutive preceding financial years:
Consolidation follows Singapore Financial Reporting Standards (SFRS) or IFRS, as applicable. If the parent company prepares consolidated financial statements, use those figures. If not, manually total the assets, revenue, and employee count of all group members.
The small group test applies regardless of where the parent is incorporated. When a parent company is based outside Singapore — in the USA, UK, or Australia, for instance — the Singapore subsidiary must still assess whether the overall group qualifies as a small group.
Key steps:
Under the current small company framework (effective from 2015), companies with corporate shareholders still qualify for audit exemption. This is a critical distinction from the old exempt private company (EPC) regime, which excluded companies with any corporate shareholders.
Many foreign-owned subsidiaries overlook this change and incorrectly assume that a corporate parent automatically disqualifies them.
It does not. Under the current framework, only the quantitative thresholds and group-level tests matter — corporate ownership structure has no bearing on eligibility.
Step 1 — Confirm private company status
Verify the company is a private company (as defined under the Companies Act) throughout the financial year. Public companies and certain listed entities do not qualify regardless of size.
Step 2 — Gather the two preceding years' financial data
Collect for each of the two financial years immediately before the current year:
Use figures from financial statements prepared under applicable Singapore accounting standards.
Step 3 — Apply the two-of-three test
Check if the company meets at least two of the three quantitative criteria in each of those two preceding years:
Step 4 — Check group status if applicable
If the company is part of a group, repeat the two-of-three test using consolidated group-level figures for the same two preceding years. Only if both the company individually and the group collectively pass does the exemption apply.
Passing the eligibility assessment is only part of the equation. Companies must also track their status year on year, since both growth and structural changes can affect the exemption going forward.
Once a company qualifies as a small company, it retains the exemption in subsequent years automatically; no reapplication is required. That said, eligibility must be monitored each year.
Disqualification triggers:
A company loses its small company status if:
For companies managing multi-entity group structures or cross-border operations, tracking consolidated figures across two financial years adds meaningful complexity — and getting those calculations wrong can trigger an unexpected audit requirement.
Audit exemption only removes the requirement to appoint a registered public accountant and have accounts formally audited. It does not remove the obligation to prepare annual financial statements.
Exempt companies must still:
The distinction matters: "audit exemption" means "exemption from external audit," not "exemption from accounting and financial reporting."
Under Section 205B(6), shareholders holding 5% or more of voting rights can require the company to conduct a formal audit even if it qualifies for exemption. This must be done by written notice during a financial year but not later than one month before the end of that year.
Companies should be aware this right exists and plan accordingly if significant minority shareholders are present.
Shareholder rights aside, ACRA also retains independent authority to intervene. The Registrar conducts periodic spot checks on financial statements of all companies, including exempt ones. Under Section 205D, ACRA may require any exempt company to lodge audited financial statements if:
In cases involving legal disputes or regulatory concerns, ACRA may appoint an auditor regardless of exempt status.
This means the quality of your bookkeeping affects more than compliance — it determines how exposed you are if ACRA ever takes a closer look.
The most common misconception is that audit exemption allows companies to be informal or imprecise about their accounting. In reality, exempt companies must still maintain proper accounting records and prepare financial statements that comply with applicable standards. The only thing removed is the formal external audit requirement.
That said, the compliance obligations remain real. Companies must retain accounting records for at least 5 years under Section 199(2), and directors must confirm in the annual return that records have been kept in accordance with Section 199. Non-compliance can result in penalties and potential loss of exemption.
Many business owners operating through corporate structures still assume they're disqualified from exemption — but this confusion stems from outdated rules. Corporate shareholders were disqualifying under the old exempt private company (EPC) framework, but the small company criteria introduced in 2015 changed that entirely.
Key differences:
FeaturePre-2015 EPC RegimeCurrent Small Company RegimeRevenue threshold< SGD 5 million≤ SGD 10 million (2 of 3 test)Corporate shareholdersDisqualifyingNot disqualifyingMax shareholders20 membersNo limit (must be private company)Assessment periodSingle financial year2 immediately preceding FYsGroup testNot applicableSmall group test on consolidated basis
A company that qualifies this year can lose exemption the next if revenue or assets spike — eligibility is re-evaluated against the two immediately preceding consecutive financial years, every year. Assuming continued exemption without checking is one of the most common compliance gaps.
To stay ahead of this:
The current thresholds are total annual revenue ≤ SGD 10 million, total assets ≤ SGD 10 million, and total employees ≤ 50. A company must meet at least two of these three criteria for the two immediately preceding consecutive financial years. ACRA is reviewing these thresholds as of 2026.
There is no formal application process — a company self-assesses whether it meets the small company criteria each year and, if eligible, simply does not appoint a statutory auditor for that financial year.
The 2-year rule requires a company to satisfy at least two of the three quantitative criteria (revenue, assets, employees) in each of the two financial years immediately preceding the current year. Missing that threshold in even one of those two years disqualifies the company.
Yes, under the current small company framework (effective from 2015), the presence of corporate shareholders does not disqualify a company. This is a key difference from the previous exempt private company (EPC) regime, which excluded companies with any corporate beneficial interest.
Yes, audit exemption does not remove the requirement to prepare and file annual financial statements with ACRA. Exempt companies must still file unaudited accounts prepared in accordance with Singapore accounting standards and maintain proper accounting records.
A company loses its exemption if it ceases to be a private company, or if it fails to meet at least two of the three quantitative criteria across the two most recent consecutive financial years. One underperforming year does not trigger disqualification — two consecutive years of missing the criteria do.
