ACCOUNTING COMPARISON · UPDATED AUGUST 2026
Audited vs unaudited financial statements: which does your company need?
Most Singapore SMEs never need a statutory audit — the small company exemption covers any private company passing a 2-of-3 size test. But the test has a group catch that surprises subsidiaries, the exemption can be overridden, and “unaudited” removes far less paperwork than founders expect. Here is the whole decision.
THE SMALL COMPANY TEST
Two of three: S$10m revenue, S$10m assets, 50 employees.
Any 2 of 3, for the two preceding years
Revenue not exceeding S$10 million; total assets not exceeding S$10 million at year end; not more than 50 employees at year end. Meet any two of the three for each of the two financial years immediately before the year in question — and be a private company throughout — and the audit requirement falls away.
New companies get a head start
A company in its first or second financial year after incorporation cannot have two years of history, so it qualifies by meeting 2 of 3 in that year itself (while being private throughout). Most newly incorporated SMEs are audit-exempt from day one without doing anything.
One bad year does not end it
Small-company status continues automatically once gained. It is lost only when the company ceases to be private, or fails the 2-of-3 test for two consecutive preceding years — and a company that later re-qualifies becomes small again. Hovering near a threshold is not an immediate audit trigger.
Corporate shareholders are fine
The exemption does not require exempt-private-company status — a company with corporate shareholders can be a small company. What matters is being private (50 members or fewer, shares not publicly offered) and passing the size test. Public companies can never use it.
THE GROUP CATCH
In a group, the whole group must be small.
This is where the exemption is most often misjudged — usually by Singapore subsidiaries of overseas parents who assumed only local numbers counted.
Parents and subsidiaries need both tests
A parent company is exempt only if it is itself a small company and its group is a small group. The same dual requirement applies to every subsidiary. Being tiny yourself is not enough if the group above or around you is not.
The group test is consolidated — foreign entities included
A small group meets any 2 of 3 on a group basis: consolidated revenue ≤ S$10 million, consolidated assets ≤ S$10 million, aggregate employees ≤ 50, for each of the two preceding years. Overseas holding and sister companies count. A Singapore subsidiary of a large foreign group will generally need an audit however small its own numbers are.
No consolidated accounts? Aggregate instead
Where the group does not prepare consolidated statements, the test uses the aggregated totals of all group members. The arithmetic changes; the principle — the whole group must be small — does not.
OVERRIDES
Four ways the audit question reopens.
Shareholders holding 5% can demand one
Members holding at least 5% of the issued shares (or 5% of members) can require an audit for a financial year by written notice — given not later than one month before that year ends. The exemption then simply does not apply for that year.
ACRA can order audited statements
The Registrar can require a company to lodge audited financial statements where record-keeping or accounts obligations have been breached, or where it is otherwise in the public interest. Audit exemption is a concession for compliant companies, not a shield.
Dormant companies sit under a different rule
A company dormant since formation or since the end of the previous financial year is audit-exempt regardless of size — the only exemption that can also cover non-private companies. Dormant relevant companies with assets of S$500,000 or less escape preparing statements entirely.
The auditor appointment follows the exemption
A non-exempt company must appoint an auditor within 3 months of incorporation. An exempt company simply does not appoint one — and if it later loses the exemption, it must appoint an auditor before the next AGM.
WHAT UNAUDITED STILL MEANS
Everything that stays the same.
Full financial statements, true and fair
Complete statements complying with the Singapore Financial Reporting Standards, giving a true and fair view — laid before members. Unaudited changes who checks the statements, not what they must contain.
A signed directors' statement
The statements must be accompanied by a statement signed by two directors (or the sole director) covering the matters in the Twelfth Schedule. Responsibility for the numbers stays squarely with the board.
The same ACRA filing, in XBRL
Audit exemption does not change filing requirements. A company required to file financial statements with its Annual Return still files them — Full or Simplified XBRL by size — whether audited or not. Only solvent exempt private companies and qualifying dormant companies skip the filing itself.
The same IRAS expectations
IRAS accepts unaudited statements wherever the Companies Act exemption applies. Form C-S filers (revenue ≤ S$5 million) do not submit financial statements at all but must prepare and retain them; Form C filers attach their audited or unaudited statements to the return.
BEYOND THE STATUTE
When you would audit anyway.
None of the following is required by law — they are commercial demands we see in practice, and they are the usual reason an exempt company keeps its auditor.
Banks and lenders
Credit facilities above modest limits routinely come with a covenant to deliver audited statements annually. If a facility is on the roadmap, ask the bank early — an audit agreed in month one is far cheaper than one reconstructed under a drawdown deadline.
Investors and buyers
Fundraising and exit due diligence move faster and price better on audited numbers. Some shareholder agreements simply require an annual audit regardless of the statutory exemption — check yours before assuming the exemption applies in practice.
Tenders, licences and grants
Some tender prequalifications, licence conditions and grant claims ask for audited statements or an auditor's certification of specific figures. These are contract-by-contract demands, not law — read the requirement before commissioning anything, because a certification engagement is smaller than a full audit.
Common questions.
Who qualifies for audit exemption in Singapore?
A private company that meets any 2 of 3 criteria — revenue not exceeding S$10 million, total assets not exceeding S$10 million, not more than 50 employees — for each of the two preceding financial years. A company in a group must additionally belong to a small group meeting the same test on a consolidated basis, foreign entities included. Dormant companies are exempt under a separate rule regardless of size.
Is my new company audit-exempt?
Usually yes. A company in its first or second financial year qualifies by meeting 2 of the 3 criteria in that year itself, provided it is a private company throughout. Most newly incorporated SMEs are exempt from their first year — unless they are subsidiaries of groups that are not small.
Do unaudited financial statements still need to be prepared and filed?
Yes. Audit exemption removes the auditor, not the statements. The company still prepares full SFRS-compliant financial statements with a signed directors' statement, still lays them before members, and still files them in XBRL with the Annual Return where filing is required. Only solvent exempt private companies and qualifying dormant companies are excused from the filing itself.
Does IRAS require audited accounts?
No. IRAS confirms that dormant companies and small companies need not have their statements audited, as provided under the Companies Act. Form C-S filers do not submit financial statements with the return at all (they prepare and retain them); Form C filers attach audited or unaudited statements as applicable.
Can my company lose the audit exemption?
Yes, three ways: growth — failing the 2-of-3 test for two consecutive years; ceasing to be a private company; or being required to audit by shareholders holding at least 5% (by notice up to one month before year end) or by ACRA where compliance has broken down. A company that shrinks back below the thresholds can qualify again.
Will the S$10 million thresholds change?
Possibly. The thresholds have been unchanged since the framework began in 2015, and in February 2026 ACRA announced a review — consulting on raising the revenue and asset thresholds and on letting subsidiaries qualify even where the group does not. As of August 2026 no change has been legislated: the test is still S$10 million, S$10 million and 50 employees.
Official sources
Thresholds and statutory rules are as published in the Companies Act 1967 and by ACRA and IRAS, checked on 25 August 2026.
- ACRA: Audit exemptions
- Companies Act 1967, s 205C (small company exemption)
- Companies Act 1967, Thirteenth Schedule (the criteria)
- Companies Act 1967, s 205B (dormant companies, 5% right)
- ACRA: Review of the audit exemption framework (Feb 2026)
- ACRA: FS filing requirements and exemptions
- IRAS: Guidance on filing Form C-S / Form C
This guide provides general information, not professional advice. Exemption status depends on the company’s structure, group and history; ACRA announced a review of the audit exemption thresholds in February 2026, and the figures on this page reflect the law in force at the date shown.
WRITTEN BY
Jacqueline May
Principal Accountant · Chartered Accountant (Singapore), ISCA member
Jacqueline is a Chartered Accountant (Singapore) and ISCA member, and the Principal Accountant at Synergy Accounting, a Singapore practice established in 2013. She works on corporate tax, GST and ACRA compliance for small and medium businesses — the filings, deadlines and judgement calls most owners would rather hand over. These guides are written from what she sees in practice.