Most private companies in Singapore can avoid the cost and time of a statutory audit if they meet ACRA's small company criteria. Understanding whether your company qualifies means checking three simple thresholds and knowing the rules for companies that belong to a group.
The two-of-three test for small company audit exemption
Under Section 205C of the Companies Act, your private company qualifies for audit exemption if it meets at least two of these three criteria for each of the two financial years immediately before the current year:
- Total annual revenue of $10 million or less, based on your financial statements prepared in accordance with accounting standards
- Total assets of $10 million or less, based on your financial statements prepared in accordance with accounting standards
- 50 full-time employees or fewer, counted at the end of your financial year
For example, a company with a 31 December 2025 financial year-end that wants to claim exemption for its FY2026 accounts must meet two of the three tests in both FY2024 and FY2025. If you met the thresholds in FY2024 but exceeded two of them in FY2025, you lose the exemption.
New companies and the initial-year rule
A company incorporated less than two years ago can qualify for audit exemption if it is a private company and meets two of the three criteria in its current financial year. You check again in the second year; if you do not qualify in the first year, you still have a chance in year two.
When you belong to a group: consolidated thresholds apply
If your company is part of a group—meaning it is owned by another company or holds subsidiaries—the audit exemption test changes. Your company must be a private company, and the entire group (including all local and foreign entities) must meet at least two of the three criteria on a consolidated basis for the two preceding financial years.
The consolidated figures come from your holding company's consolidated financial statements. If the holding company does not prepare consolidated accounts, you aggregate total assets and revenue across all group members to test the thresholds.
This means that even if your Singapore subsidiary on its own would qualify as a small company, you cannot claim the exemption if the group as a whole breaches two of the three limits. Conversely, a subsidiary that looks large in isolation may still be exempt if the group as a whole qualifies.
Foreign holding companies count too
The small company audit exemption applies only to Singapore-incorporated companies, but when determining whether your group qualifies as a small group, ACRA takes into account all entities within the group, including foreign companies. A Singapore subsidiary of an overseas parent must assess whether the global group meets the thresholds.
What crossing the thresholds means
Once your company qualifies as a small company, it remains exempt in subsequent years unless:
- It ceases to be a private company at any time during a financial year, or
- It fails to meet at least two of the three criteria for the immediate past two consecutive financial years.
If you cross the thresholds, you lose the exemption and must appoint an auditor. The same loss-of-exemption rule applies to groups: a small group remains qualified until it breaches the consolidated two-of-three test for two consecutive years.
Note that shareholders holding at least 5 per cent of your company's issued shares retain the right to require an audit at any time, even if your company qualifies for exemption under the small company framework.
Exemption does not mean exemption from proper accounts
Qualifying for audit exemption does not reduce your obligations to keep proper accounting records or prepare financial statements. ACRA requires every company—whether audited or not—to maintain books that give a true and fair view, comply with the applicable accounting standards (typically Singapore Financial Reporting Standards), and file annual returns and financial statements by the statutory deadlines.
The exemption simply removes the requirement to engage an independent auditor to review and opine on those accounts. You still need properly prepared financial statements signed off by your directors. If your accounts are incomplete, inaccurate, or filed late, penalties under the Companies Act apply regardless of audit exemption status.
Many business owners also find that banks, landlords, and investors ask for audited accounts even when the law does not require them. In practice, exemption gives you the choice: audit if stakeholders want it, skip it if they do not.
What business owners should do
- Check your total revenue, total assets, and headcount at each financial year-end and document whether you meet two of the three tests.
- If you are part of a group, coordinate with your holding company to confirm the consolidated figures and your exemption eligibility.
- Continue to prepare financial statements in accordance with accounting standards and file your annual return with ACRA on time, whether or not you engage an auditor.
- Review shareholder agreements and financing documents to confirm whether third parties require an audit even when ACRA does not.
- Plan ahead: if your company is growing toward the thresholds, budget for audit costs before you lose exemption.
If you need help assessing your audit exemption status, preparing compliant financial statements, or managing year-end accounting and tax filings, our team can guide you through the requirements and keep your records ACRA-ready. Reach out through our contact page to discuss your company's needs.
Review your revenue, assets, and headcount against the two-of-three thresholds each year, and remember that exemption from audit does not mean exemption from proper accounts. Keep your books compliant, file on time, and plan for audit costs if your company outgrows the small company criteria.