In Singapore, all companies are required to appoint an auditor after three months of incorporation unless they are exempted under the Company Act. It is vital that the company appoints an auditor not only because it is mandatory but also to ensure that the company complies with the tax laws and that all financial records are accurate.
Appointing an auditor is also beneficial to the company as it will provide transparency to all the company’s transactions. The auditor provides assurance to the company’s investors, shareholders, and creditors that the funds are handled properly and no fraud or illegal activities are being done using the company’s money. It is also able to present the actual and true financial stand of the company. With this, the directors and administrators of the company will be able to use this data to improve the performance of the company and know where to cut and add funding to their operations.
Accountant vs. Auditor
Now, what is the difference between an accountant and an auditor? The accountant’s main responsibilities are monitoring the everyday bookkeeping, recording all necessary financial documents and statements and preparing and filing the tax forms. On the other hand, the auditor is the one who verifies the accuracy of all the financial documents, statements and tax forms that the company produced. Also, the auditor has the right to question and investigate if the figures presented do not add up to the financial records.
The auditor’s role however is not only limited to checking if all financial statements are true and correct but also must be able to provide recommendations on how to improve processes and procedures the company is practising to obtain maximum efficiency to both the employees’ productivity and the company’s performance.
Requirements of Appointing an Auditor
Within three months of the company’s incorporation, the directors should appoint an auditor. Only those who are public accountants or accounting firms that are approved by ACRA or the Accounting and Corporate Regulatory Authority are eligible to be appointed as company auditors. The appointed auditor will then hold an office until the conclusion of the next AGM or the Annual General Meeting.
During the next AGM, the company can appoint a new auditor or re-appoint the current holding office. In case none from both options are chosen by the directors, and appointment of an auditor may be made by the Registrar upon the company’s request.
There is no law stating how much an auditor’s fee is in Singapore. The amount to be paid to the auditor is up to negotiation and should be fixed by the time it is presented during the general meeting. The members of the company may allow the directors to fix the auditor’s fees.
Removal of Auditor
In case the company decides to remove the company auditor, the company should be able to provide a resolution during the general meeting. Prior to the general meeting, a notice should be made available to the company and it must be submitted at least 28 days before the date of the general meeting.
Once a company removes an auditor, it is obliged to provide ACRA with the same written notice. A resolution for nomination should be passed and must comprise at least 75% of voters agreeing to the appointment. During the same meeting, a new auditor may be appointed and shall hold office up to the conclusion of the next AGM. On the other hand, if there is no appointment during the meeting, the meeting may be adjourned and a written notice of nomination should be submitted at least 21 days before the next general meeting.
If these obligations have not been met and complied with, each director and the company will be fined up to $5000.
Exemptions from Audit Requirements
A company may be exempted in appointing an auditor if they fall under the following:
A company is classified as a small company if it is privately owned all throughout the current financial year and must satisfy at least 2 of these criteria:
- Annual revenue is up to $10 million.
- The company’s total asset value is up to $10 million.
- The company’s employees should not exceed 50 people.
A company is classified as a small group if they are able to satisfy at least 2 from the criteria for two consecutive financial years prior to the current financial year:
- The consolidated revenue of the group is up to $10 million.
- The consolidated total assets of the group are up to $10 million.
- The total number of employees should not exceed 50 people.
A company is classified as dormant if there is no occurrence of an accounting transaction. It should also fall under these criteria:
- Since incorporation, the company has been dormant.
- Since the end of the previous financial year, the company has been dormant.
Exemption to Exempt from Audit Requirements
Even if the company falls under the criteria of exemption from audit requirements, they may still be obliged by the Registrar to follow and submit auditing requirements if the company is deemed to have breached Company Act laws in relation to the keeping of accounting records and financial statements. The company must be able to provide necessary auditing documents to prove otherwise.
Having an appointed auditor is crucial to the company’s success and protection. Auditors should not be perceived as a threat to a company, rather, an external help that can assist in the company’s future. Auditors are professionals that can serve as a check and balance of the company’s financial state, promoting an honest and transparent environment for all the members of the company from its investors, shareholders, directors and employees.
On the other hand, if your company falls under the exemption of auditing requirements, it can be an advantage to also practice auditing processes.
To learn more about the detailed requirements of appointing an auditor, you may visit and read through the Appointment and Remuneration Section of the Company Act.