In the realm of financial disclosure, precise and transparent financial documentation holds paramount importance for both businesses and investors. These statements serve as a crucial window into a company’s fiscal voyage.
For those at the helm of private enterprises in Singapore, the narrative expands further. An indispensable milestone for those establishing roots in the Singaporean business landscape is the audit process. In accordance with the mandates of the Singapore Company Act, private limited companies are obligated to undergo an annual Statutory Audit. This entails a comprehensive financial examination led by a licensed auditor or a proficient public accountant.
Statutory audits provide an impartial evaluation of a company’s financial statements, ensuring their accuracy in portraying the true financial position of the organization. Beyond merely instilling confidence among stakeholders in the company’s financial reporting, these audits pave the way for well-informed investment decisions.
Delve into the intricacies of audited and unaudited financial statements, all within the distinctive framework of Singapore. Explore the disparities, advantages, and managerial approaches associated with each type of financial statement.
In this blog, we’ll explore:
- Understanding Financial Statements in Singapore:
- Audited vs. Unaudited
- What Are the Criteria for Exemption from External Audits in Singapore?
- Who is Eligible to Prepare Unaudited Financial Statements?
- FAQs: Financial Reporting in Singapore
- Automa8e: AI – Backed Unaudited Financial Reports
Understanding Financial Statements in Singapore: Audited vs. Unaudited
In Singapore, keeping financial matters clear is crucial, and the Accounting and Corporate Regulatory Authority (ACRA) plays a vital role in this. It is a rule for all companies, big or small, to create and submit their financial statements every year.
However, there is an interesting difference when it comes to these statements. Most companies go for audited financial statements, but some have the choice to go for unaudited ones. This choice is important for businesses, shaping how they handle and share their financial information.
Audited Financial Statements:
Audited financial statements are a necessity for many types of companies, involving a thorough examination conducted by an independent certified public accountant (CPA) or an auditing firm. Think of this external review as hiring a financial detective to ensure accuracy and compliance with accounting standards. The key aspects of audited financial statements include:
- External Review: These statements undergo an external audit by an independent auditor, adding an extra layer of validation to ensure precision and adherence to accounting standards.
- High Assurance: Professionals meticulously examine audited statements, offering a higher level of confidence to stakeholders regarding the accuracy of the financial information.
- High Cost and Time Consumption: The comprehensive nature of audited financial statements results in additional costs due to auditing services, and the preparation process tends to take a longer time.
Unaudited Financial Statements:
Now, you might be curious about what unaudited financial statements entail and the criteria for a company to qualify for them. Smaller companies meeting specific criteria outlined by the Accounting and Corporate Regulatory Authority (ACRA) can choose unaudited financial statements.
Here is what distinguishes unaudited financial statements:
- Internal Preparation: These statements are generated internally by the company’s accounting team, without the involvement of an external auditor.
- Moderate Assurance: Unaudited financial statements provide a lower level of assurance compared to audited ones. They might have a few more uncertainties or errors, given the absence of external validation.
- Low Cost and Time Efficiency: The preparation of unaudited financial statements is cost-effective and quicker. While they may lack the same level of external validation, they still offer valuable insights.
In conclusion, the decision between audited and unaudited financial statements depends on several factors, including the company’s size and regulatory requirements. Regardless of the path, the goal is to present accurate financial insights and ensure transparency in financial reporting.
What Are the Criteria for Exemption from External Audits in Singapore?
Requirements for unaudited financial statements
Smaller companies operating in Singapore have the option to choose unaudited financial statements if they fulfill specific requirements. This means they are not obligated to undergo a review by an external auditor for their financial reports. The eligibility criteria for audit exemption are detailed below:
Small Company Status:
The company operates as a private entity in the current financial year.
It satisfies at least two out of the three quantitative criteria for the past two consecutive financial years:
Total annual revenue is less than or equal to S$10 million.
Total assets are less than or equal to S$10 million.
The total number of employees is less than or equal to 50.
A small company can maintain its eligibility and continue preparing unaudited financial statements for subsequent financial years if it meets the criteria. However, disqualification may occur if the company ceases to be a private company at any point during a financial year or fails to meet at least two out of the three criteria for the immediate past two consecutive financial years.
Small Company in a Small Group:
If the company is part of a group, additional criteria apply for audit exemption.
The company itself must qualify as a small company based on the criteria mentioned.
The entire group of companies to which the company belongs must be classified as a “small group.”
For a group to be considered small, it must meet at least two out of the three quantitative criteria on a consolidated basis for the immediate past two consecutive financial years.
Crafting Unaudited Financial Statements: A Unique Approach
The process of preparing unaudited financial statements in Singapore involves a series of distinctive steps, ensuring precision and compliance in financial reporting. Although these statements do not undergo external audits, they remain pivotal in shedding light on a company’s financial well-being.
Selecting Accounting Standards: Choose between the Financial Reporting Standards for Small Entities (SFRS for Small Entities) or the complete Singapore Financial Reporting Standards (SFRS).
Collecting Financial Data: Compile accurate financial information, including transaction records and bank statements.
Creating a Trial Balance: List all account balances from the general ledger to maintain equilibrium between debits and credits.
Generating Financial Statements: Based on the adjusted trial balance, create primary financial statements, summarizing revenues, expenses, net income or loss, assets, liabilities, equity, and cash flows during the reporting period.
Incorporating Disclosures and Notes: Provide additional context about the company’s financial position and performance.
Internal Review: Scrutinize the statements for accuracy and include a management statement confirming compliance with selected accounting standards.
Director’s Approval: Seek approval from the company’s directors for the unaudited financial statements.
Filing and Distribution: File the financial statements with the Accounting and Corporate Regulatory Authority (ACRA) and share them with stakeholders. Maintain comprehensive records related to the preparation of unaudited financial statements for future reference.
Who is Eligible to Prepare Unaudited Financial Statements?
As highlighted earlier, the task of preparing unaudited financial statements falls within the purview of the company’s internal accounting team, comprising qualified accountants or financial professionals.
Despite the absence of external audits, precision and adherence to compliance standards are indispensable for unaudited financial statements, serving diverse purposes such as loan applications, tax submissions, due diligence in business activities like mergers or acquisitions, shareholder accountability, Annual General Meetings, industry-specific regulatory requirements, and achieving cost efficiency by circumventing the high expenses associated with external auditing.
Frequently Asked Questions: Financial Reporting in Singapore
A: Financial documentation plays a crucial role in providing transparency for both businesses and investors. It serves as a window into a company’s fiscal journey, guiding stakeholders and influencing investment decisions.
A: Private limited companies in Singapore are required to undergo an annual Statutory Audit, as mandated by the Singapore Company Act. This involves a comprehensive financial examination led by a licensed auditor or a proficient public accountant.
A: Audited financial statements undergo external scrutiny by an independent auditor, providing high assurance and precision. They come with additional costs and take longer to prepare. Unaudited statements, on the other hand, are internally prepared, offering moderate assurance, being cost-effective, and quicker to generate.
A: Automa8e, a pioneer in Accounting AI, offers AI-backed Unaudited Financial Reports Compilation. Recognized and verified with ASR plus 3 status, Automa8e ensures accuracy and compliance, leading the way in unaudited financial statements.
A: Smaller companies qualify if they meet criteria such as operating as a private entity, total annual revenue ≤ S$10 million, total assets ≤ S$10 million, and total employees ≤ 50. Additional criteria apply for companies in small groups.
A: Automa8e’s approach involves selecting accounting standards, collecting accurate financial data, creating a trial balance, generating financial statements, incorporating disclosures and notes, internal review, director’s approval, and filing and distribution.
A: The task falls within the purview of the company’s internal accounting team, comprising qualified accountants or financial professionals.
A: Unaudeited financial statements are used for loan applications, tax submissions, due diligence in business activities, shareholder accountability, Annual General Meetings, meeting regulatory requirements, and achieving cost efficiency.
A: Automa8e ensures accurate and compliant financial reporting, aligning with business objectives and enhancing financial credibility. The software streamlines the process, providing a reliable and efficient solution.
A: Contact Automa8e today to begin a journey towards accurate and trustworthy unaudited financial statements in Singapore. Welcome to the future of accounting with Automa8e!
Automa8e – AI – Backed Unaudited Financial Reports
Welcome to Automa8e – Your Gateway to AI-Powered Accounting Excellence in Singapore!
Automa8e is a cutting-edge AI-powered accounting software based in Singapore, heralding a new era where innovation seamlessly merges with efficiency. As pioneers in Accounting AI, we hold exclusive proprietary rights, setting the benchmark for the future of accounting.
Say goodbye to traditional methods, and embrace the revolution with Automa8e. Our AI-backed Unaudited Financial Reports Compilation is a game-changer, providing unparalleled accuracy and efficiency. We stand as the first and foremost in Singapore, leading the way in the realm of unaudited financial statements.
Automa8e is not just a pioneer; it’s a recognized and verified solution holding ASR plus 3 status, specializing in adhering to Singapore’s stringent financial regulations. Trust us to ensure that your financial statements are not only accurate but also fully compliant. Let’s collaborate to create financial reporting that not only aligns with your business objectives but also enhances your financial credibility.
Prepare financial statements confidently with Automa8e – your reliable partner in navigating the intricate landscape of financial reporting in Singapore. Contact us today to embark on a journey toward accurate and trustworthy unaudited financial statements that elevate your financial standing. Welcome to the future of accounting with Automa8e!