A Limited Exempt Private Company is exempt from audit if all the following conditions are met:
- Financial period commences on or after 15 May 2003 and the company’s revenue is not more than 2.5 million, or;
Financial period commences on 1st June 2004 and the company’s revenue is not more than 5 miilion;
- Proper accounting records are maintained.
- The Financial Statements are prepared according to Singapore’s Financial Reporting Standards (FRS) for submission to IRAS.
- An audit is not requested by:
- Shareholders holding not less than 5% interest in the Company’s share capital; or
- Registrar of Companies and Businesses (ACRA), or
- Other Government Authorities/Financial Institutions/Creditors.
Alternatively, a company is eligible for audit exemption if it is dormant. A company is dormant if there are no accounting transactions* except those relating to:
- the taking of shares in the company by a subscriber to the memorandum in pursuance of an undertaking of his/hers in the memorandum;
- the appointment of a secretary of the company under Section 171
- the appointment of an auditor under Section 205
- the maintenance of a registered office under Sections 142, 143 and 144;
- the keeping of registers and books under Section 88, 131, 173, 189 and 191;
- the payment of any fee specified in the Second Schedule of the Companies Act or an amount of any fine or default penalty paid to the Registrar under Section 409(4); and
- such other matter as may be prescribed.
* An accounting transaction need not create a cash in-flow or out-flow, so the writing-off of a debt, impairment of an asset, adjustment of a provision, or revaluation of an asset will result in a company not being dormant. Likewise, transactions not related to the exempt activities in the payment of interests and taxes, or the payment of or receipt of dividends (even if passed through), will result in a company not being dormant.
Notwithstanding the audit exemption provisions, the Companies Act requires the Directors of the company to maintain proper accounting records and prepare ‘true and fair’ financial statements that comply with FRS.