Audit Exemption Criteria in Singapore and Malaysia – What SMEs Need to Know
In today’s dynamic business landscape, small and medium-sized enterprises (SMEs) are always looking for ways to operate more efficiently and reduce costs. One important area where SMEs can benefit is through audit exemptions. Both Singapore and Malaysia offer audit exemption criteria that allow qualifying private companies to bypass mandatory audits, provided they meet specific thresholds.
This article provides a comprehensive overview of the audit exemption rules in Singapore and Malaysia, offering SMEs a clear understanding of whether they qualify and how they can benefit.
What Is an Audit Exemption?
An audit exemption is a provision that allows eligible companies to be exempt from having their financial statements audited. However, these companies are still required to prepare financial statements that comply with the relevant accounting standards.
The aim is to reduce the regulatory and financial burden on smaller companies while ensuring that they remain accountable and transparent.
Audit Exemption Criteria in Singapore
The Accounting and Corporate Regulatory Authority (ACRA) oversees the audit requirements in Singapore under the Companies Act. Since 1 July 2015, a company may qualify as a “small company” and be exempted from audit.
Criteria for Small Company Audit Exemption
To qualify for audit exemption in Singapore, a private company must meet at least two out of the following three criteria for the immediate past two financial years:
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Total annual revenue not exceeding S$10 million
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Total assets not exceeding S$10 million
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Number of employees not more than 50
Group Audit Exemption
If a company is part of a group, the entire group must qualify as a small group. The group is considered small if it meets at least two out of the three criteria above on a consolidated basis for the last two financial years.
Key Notes:
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Even if exempted from audit, companies must still prepare proper financial statements in accordance with the Singapore Financial Reporting Standards (SFRS).
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ACRA may still require audited financial statements if there is a compliance review or investigation.
Audit Exemption Criteria in Malaysia
In Malaysia, the Companies Commission of Malaysia (SSM) introduced audit exemptions under the Companies Act 2016, supported by Practice Directive No. 3/2017.
There are three categories of private companies eligible for audit exemption in Malaysia:
1. Dormant Companies
Companies with no accounting transactions during the financial year qualify for audit exemption as dormant companies.
2. Zero-Revenue Companies
Companies that have had zero revenue in the current and the previous two financial years and have total assets not exceeding RM300,000.
3. Threshold-Qualified Companies
Companies that meet all of the following criteria in the current and previous two financial years:
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Revenue not exceeding RM100,000
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Total assets not exceeding RM300,000
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Not more than five employees
Conditions for Audit Exemption:
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Audit exemption is not automatic. A company must pass a board resolution to opt for it.
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Companies must still prepare unaudited financial statements in compliance with the Malaysian Private Entities Reporting Standards (MPERS).
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Financial statements must clearly state that the company is taking advantage of the audit exemption.
Benefits of Audit Exemption for SMEs
Cost Reduction
Audit exemptions help SMEs cut down on annual audit fees, which can be a significant expense for smaller businesses.
Faster Financial Reporting
Without the audit requirement, companies can complete financial reporting more efficiently, which is particularly helpful for internal decision-making.
Administrative Relief
Reduced compliance obligations free up time and resources, allowing business owners to focus on operations and growth.
Risks and Responsibilities Still Apply
Even though audit-exempt companies are not required to undergo a statutory audit, they are still required to:
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Maintain accurate accounting records
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Prepare proper financial statements
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Submit necessary tax filings and returns
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Abide by directors’ statutory duties
Failure to meet these responsibilities can lead to penalties and enforcement actions.
How USAFE Supports SMEs with Audit and Compliance
At USAFE, we understand that regulatory compliance is essential for business success. We help SMEs in both Singapore and Malaysia evaluate their audit exemption eligibility, prepare compliant financial reports, and maintain statutory records.
Our services include:
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Assessing audit exemption eligibility
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Preparing unaudited financial statements
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Ensuring tax compliance
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Providing bookkeeping and accounting services
We ensure that your business stays compliant while optimizing your financial operations.
Conclusion: Should Your SME Consider Audit Exemption?
If your business meets the audit exemption criteria in Singapore or Malaysia, it’s a valuable opportunity to reduce costs and streamline financial reporting. However, it’s important to remember that audit exemption does not remove the need for proper recordkeeping and compliance.
Engaging a trusted partner like USAFE ensures that you meet all legal obligations while taking advantage of audit exemption benefits.
Contact USAFE Today
Need help navigating audit exemption in Singapore or Malaysia? Speak with our team at USAFE for expert guidance on eligibility, financial reporting, and ongoing compliance. We make regulatory compliance simple so you can focus on growing your business.
Disclaimer: This article is for informational purposes only and does not constitute any professional advice. Feel free to contact us to consult with our professional advisors team for personalized advice and guidance.
Sources (Malaysia): https://www.ssm.com.my/Pages/Legal_Framework/Audit-Exemption.aspx
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