On 26 February 2026, ACRA announced a formal review of Singapore's audit exemption framework, examining whether the S$10 million thresholds set in 2015 still reflect the size of a genuinely small business today. The review does not change the current audit requirement Singapore enforces on private companies, but it signals that the thresholds most companies rely on to skip a statutory audit may move in the near future.
For now, the small company exemption under Section 205C of the Companies Act remains the framework every private company should test itself against each year. Meeting the criteria removes the obligation to appoint an auditor, but it does not remove the underlying financial reporting work, and several conditions catch directors off guard, particularly around group structures and the point at which a minority shareholder can force an audit regardless of size.
This guide covers the current exemption criteria, the distinction between the small company and dormant company routes, what the exemption does not remove, ACRA's 2026 review, and what preparing unaudited financial statements actually involves once the audit itself is off the table.
Key Takeaways
A private company qualifies as a small company, and is exempt from audit under Section 205C of the Companies Act, where it meets at least 2 of 3 quantitative criteria for the immediate past 2 consecutive financial years: total annual revenue of S$10 million or less, total assets of S$10 million or less, and 50 or fewer full-time employees at financial year end.
Per ACRA's guidance on the small company concept, this framework has applied to financial years beginning on or after 1 July 2015, replacing an older regime that restricted exemption to exempt private companies with no more than 20 individual shareholders. A company no longer needs to be an exempt private company to qualify, meaning a private company with corporate shareholders, including a Singapore subsidiary wholly owned by a foreign parent, can still qualify for audit exemption provided it meets the small company criteria on its own terms.
A newly incorporated company without two years of financial history is not disadvantaged by the test. For a company in its first or second financial year, eligibility is assessed against the criteria for the current financial year alone, meaning a genuinely small startup qualifies for exemption from its very first year of operation without needing to wait for a two-year track record to accumulate.
A private company that individually meets the small company criteria does not automatically qualify for exemption if it belongs to a corporate group. Where a company has subsidiaries, or is itself a subsidiary, the entire group must also meet at least 2 of the same 3 criteria on a consolidated basis before any member of that group can rely on the exemption. A profitable, genuinely small Singapore subsidiary sitting inside a much larger foreign group is the case this rule most commonly catches: the subsidiary's own revenue, assets, and headcount may sit comfortably under every threshold, but if the consolidated group exceeds two of the three limits, the subsidiary loses exemption regardless of its own standalone size.
Practitioner's Note: This is precisely the gap ACRA's 2026 review is examining, whether a genuinely small subsidiary should be able to qualify for exemption on its own merits even where the wider group does not meet the consolidated test. Until ACRA publishes a confirmed change, the current consolidated requirement remains in force, and a Singapore subsidiary of a larger foreign group should not assume individual eligibility carries through automatically.
The small company exemption under Section 205C applies only to private companies and is assessed against the quantitative size criteria described above. A separate route, the dormant company exemption under Section 205B, applies to a company with no accounting transactions during the financial year, and notably is not restricted to private companies at all, since a dormant public company can also rely on it. A company should confirm which exemption it is actually relying on, since the qualifying tests, and the ongoing obligations attached to each, are genuinely distinct. For the full mechanics of dormant company status specifically, including the separate ACRA and IRAS tests for dormancy, ATHR's guide to dormant companies versus striking off covers that route in detail.
Qualifying for audit exemption removes the requirement to appoint an auditor and have financial statements independently examined. It does not remove the obligation to prepare financial statements in accordance with prescribed accounting standards, to file an annual return with ACRA, or the right of a sufficiently large minority shareholder to demand an audit regardless of the company's exemption status.
An exempt company must still prepare a full set of financial statements complying with Singapore Financial Reporting Standards, or SFRS for Small Entities where applicable, accompanied by a directors' statement confirming those statements give a true and fair view of the company's financial position. These unaudited financial statements are filed with the company's annual return, due within 7 months of financial year end for a private company, in the same way audited statements would be.
The override provision is the detail most directors overlook. Shareholders holding, individually or collectively, at least 5% of the company's total issued shares retain the statutory right to require the company to obtain an audit for a specific financial year, even where the company otherwise meets every small company criterion. A company that assumes exemption applies automatically once the size thresholds are met has not accounted for this shareholder-level override, which sits entirely outside the quantitative test.
Per ACRA's announcement of the audit exemption framework review, the stated objective is reducing compliance costs for small companies while maintaining adequate corporate governance oversight, an explicit acknowledgment that the S$10 million thresholds set in 2015 may no longer reflect the scale of a genuinely small business. Two specific changes are under active consideration: raising the total revenue and total assets thresholds, and exploring whether individual subsidiaries could qualify for exemption under specific conditions even where their consolidated group does not meet the small group test.
ACRA began targeted industry consultations on the proposed changes from March 2026. Notwithstanding any eventual change, the review explicitly confirms that companies will continue to be required to keep proper accounting records and prepare financial statements to prescribed standards, and that the 5% shareholder override right will remain in place regardless of how the size thresholds move. A company sitting close to the current S$10 million threshold on either revenue or assets should treat this review as a reason to monitor for updates rather than assume its exemption status is settled for the medium term.
Separately, for companies that remain subject to audit, whether because they fail the small company test or choose to audit voluntarily, a related 2026 change under the Corporate and Accounting Laws (Amendment) Act 2025 now requires every audit report to name the individual public accountant primarily responsible for the audit, not just the accounting firm, for audits conducted from 6 May 2026 onward.
Removing the statutory audit eliminates the audit fee itself, typically the largest single line item in a small company's annual financial reporting spend, but it does not eliminate the cost of preparing the financial statements in the first place. An exempt company still needs financial statements prepared to SFRS standards, a directors' statement drafted and signed, and the accounts reconciled accurately enough to support both the ACRA filing and the company's Corporate Income Tax Return to IRAS. For a company with straightforward transactions and clean bookkeeping throughout the year, this preparation cost is modest. For a company with disorganised records, multiple revenue streams, or transactions requiring judgment calls on accounting treatment, the preparation work can approach what an audit would have cost anyway, just without the independent verification an audit provides.
The genuine saving from exemption, in other words, tracks the complexity of the underlying business more closely than the presence or absence of the word "audit" on the invoice. A clean, simple small company captures most of the cost benefit exemption is designed to provide. A complex small company, even one that technically qualifies, may find the preparation cost narrows the gap considerably.
No. A company that meets the small company criteria may still choose to have its financial statements audited voluntarily, and some do, particularly where an audit supports a funding round, a banking relationship, or a specific investor requirement. Exemption is an entitlement, not an obligation to forgo an audit.
No. Audit exemption is an ACRA compliance matter concerning the Companies Act's financial reporting requirements. It does not change a company's obligation to file its Corporate Income Tax Return and supporting tax computations with IRAS on the usual schedule, and the underlying financial statements, audited or not, still need to reconcile with what is reported to IRAS.
Eligibility is assessed based on the immediate past 2 consecutive financial years, so a company does not lose exemption mid-year simply because current-year figures are trending above a threshold. The test is backward-looking, which means a company crossing a threshold in the current year typically retains exemption for that year and only loses it once the relevant prior-year figures reflect the change.
Yes, provided both the subsidiary itself meets the small company criteria and the entire group meets the small group criteria on a consolidated basis. A Singapore subsidiary with a large foreign parent is exactly the profile most likely to fail the group test even while easily passing the standalone test, which is the specific gap ACRA's 2026 review is examining.
No. Exemption removes the requirement for an independent auditor to examine and report on the financial statements. It does not remove the need for proper bookkeeping, financial statement preparation to prescribed accounting standards, or the professional judgment needed to get those statements right, all of which typically still involve an accountant or corporate service provider even without an audit in the picture.
The audit requirement Singapore enforces on private companies has a well-defined exemption most small companies already qualify for, but qualifying is a two-part test, the company's own size and the group's consolidated size, and it comes with obligations that survive the exemption entirely, from SFRS-compliant financial statements through to a 5% shareholder's right to force an audit regardless of size. ACRA's 2026 review may loosen the group test or raise the thresholds, but until a confirmed change is published, the current framework is what every director should be testing their company against each year.
For a company weighing whether the exemption's cost savings are worth the reduced independent verification, particularly ahead of a funding round or a bank facility renewal, the decision is rarely just about the exemption's formal availability. It is about whether the business genuinely needs the assurance an audit provides for reasons beyond the statutory minimum.
Confirming whether your company and, where relevant, your wider group genuinely qualify for audit exemption requires an accurate read of both the standalone and consolidated figures each year, not a one-time assessment made when the company was first incorporated.
ATHR provides accounting and tax services, covering financial statement preparation to SFRS standards whether or not your company is audit-exempt, alongside corporate secretary services for the annual return filings and group structure reviews that determine exemption eligibility.
👉 Ready to confirm your company's audit exemption status for this financial year? Book a free consultation with ATHR today →
The ATHR Content Team is a group of professional writers from Singapore and the Philippines, committed to delivering informative, practical, and engaging content for business owners across Southeast Asia.
