Understanding unaudited financial statements

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All Singapore-incorporated companies must have their financial statements filed with the Accounting and Corporate Regulatory Authority (ACRA) of Singapore. However, not all must have the statements audited.

If a company fulfills the requirements for audit exemption outlined by ACRA, it will be allowed to submit unaudited financial statements. The criteria will be discussed in this article.

Because Singapore has a high number of SMEs which can qualify for the exemption, accounting and bookkeeping services have become the most common source for preparing unaudited financial statements.

What are financial statements?

A complete set of financial statements typically consist of directors’ statement, balance sheet, income statement, statement of changes in equity, statement of cash flows and notes to the financial statements.

What is the meaning of unaudited?

Financial statements are considered unaudited as long as there is no independent review and verification process.

Unaudited financial statements are reports that have not been checked for regulatory compliance, completeness and mathematical correctness by a certified external auditor.

Do financial statements need to be audited?

Yes, unless a company is categorised as a small company, small group or small company part of a small group according to criteria outlined by the Accounting and Corporate Regulatory Authority (ACRA) of Singapore.

This law came into effect on July 1, 2015 and it is applicable for financial years of companies beginning on or after this change in law.

Can I file unaudited financial statements?

Yes. Whether they are audited or not, they must be filed. However, only companies qualified for audit exemption are legally permitted to file unaudited financial statements. In addition to that, the financial  statements must be in compliance with the Singapore Financial Reporting Standards.

Criteria for audit exemption

A company is allowed to prepare unaudited financial statements if it qualifies for audit exemption. Companies which are part of a group can also qualify if they fulfill the criteria covered in this section.

A company that qualified earlier may or may not continue to qualify, depending on certain criteria. Refer to the different scenarios elaborated in ACRA’s website.  

Small company

The criteria for being a small company is as follows:

(a) it is a private company in the financial year in question; and

(b) it meets at least 2 out of the 3 quantitative criteria below over the past two immediate, consecutive financial years:  

  • total annual revenue ≤ S$10 million;
  • total assets ≤ S$10 million; and
  • total number of employees ≤ 50.

A company can continue to qualify as a small company for subsequent financial years until it is disqualified. Disqualification occurs when:

(a) it ceases to be a private company at any time during a financial year; or

(b) it does not meet at least 2 of the 3 the quantitative criteria for the immediate past two consecutive financial years.

Small company which is part of a group

The criteria for a company which is part of a group of companies:

(a) the company must qualify as a small company; and

(b) the entire group of companies must be a “small group”.

Small group

The criteria for a group of companies to be considered a ‘small group’ is:

(a) it must meet at least 2 of the 3 quantitative criteria on a consolidated basis for the immediate past two consecutive financial years.

The group of companies can continue to be a small group for subsequent financial years until it does not meet at least 2 of the 3 quantitative criteria for the immediate past two consecutive financial years.

When are unaudited financial statements used?

Whether a company is audit exempt or not, unaudited financial statements serve many purposes:

  1. Application for loans or other banking facilities
  2. Tax submission
  3. Due diligence – when a business is being investigated before corporate expansion, such as a mergers, acquisitions or joint ventures
  4. Accountability to shareholders of a company – business partners, such as suppliers and contractors, may also ask for interim financial statements to gauge a company’s economic solidity
  5. Annual General Meetings
  6. Application for government grants
  7. Meet regulatory requirements in specific industries
  8. Cost efficiency – avoid high cost of external auditing

Wrap Up

In Singapore, only companies which hold the status of small company or small group can enjoy the exemption from auditing their financial statements. These can be submitted as part of annual return compliance.

Aside from that, the financial statements can provide vital information about your business. They not only record, classify and analyze business transactions but serve many practical and useful purposes, whether they are audited or not.

Intime Accounting can give you what is necessary to be in compliance with the Singapore financial reporting standards, so that you do not need to incur unnecessary penalties due to non-compliance.

We have a dedicated team to take care of all bookkeeping and accounting services to cater to all areas of financial statements. We can also assist with converting unaudited/audited financial statements in full XBRL format using BizFinx filing system.

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Disclaimer: The information contained in this blog is for general information purposes only and is not intended as legal advice. While we endeavour to provide information that is as up-to-date as possible, Intime Accounting makes no warranties or representations of any kind, express or implied about the completeness, accuracy, reliability, suitability or availability with respect to the content on the blog for any purpose. Readers are encouraged to obtain formal, independent advice before making any decisions.

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