Audited vs Unaudited Financial Statements in Singapore

In the realm of financial reporting, accurate and transparent financial statements are crucial for businesses and investors alike. Financial statements help to provide a vital glimpse into a company's financial journey.

If you're steering a private company in Singapore, there's more to the story! One crucial checkpoint for those building businesses on Singaporean soil is auditing. According to the Singapore Company Act, private limited companies must undergo an annual Statutory Audit. This involves an expert financial checkup conducted by a licensed auditor or a skilled public accountant.

Statutory audits provide an unbiased perspective on your company's financial statements. To ensure that the statements accurately reflect the company's financial standing. This won't only boost stakeholder confidence in company financial reporting but also paves the way for sound investment decisions.

Unravel the complexities of audited and unaudited financial statements, all within the unique landscape of Singapore. Discover the differences, benefits, and management strategies for each type of financial statement!

Audited vs Unaudited Financial Statements: Key Differences

In Singapore, the Accounting and Corporate Regulatory Authority (ACRA) plays a vital role in ensuring financial transparency. All companies, regardless of their size, whether big corporations or small businesses are required to prepare and submit annual financial statements.

However, there's an interesting distinction to be made between the financial statements. Most companies might need to prepare for audited financial statements, while some can proceed with unaudited financial statements.

Audited Financial Statements

For most categories of companies, audited financial statements are a must. These statements undergo a comprehensive review by an independent certified public accountant (CPA) or an accounting service provider. This external scrutiny is like having a financial detective ensure everything is accurate and compliant with accounting standards. The key differences with audited financial statements include:

External Review: Audited financial statements go through an external audit by an independent auditor. This extra layer of validation ensures precision and adherence to accounting standards.
High Assurance: Professionals examine audited statements, providing a higher level of confidence to stakeholders.
High Cost and Take Longer: Audited financial statements come with additional costs due to auditing services, and the preparation process might take longer.

Unaudited Financial Statements

You may wonder what is an unaudited financial statement and how the company is eligible to fall under that criteria. Indeed, smaller companies that meet specific criteria outlined by ACRA can opt for unaudited financial statements. Here's what sets unaudited financial statements apart:

Internal Preparation: Unaudited financial statements are generated by the company's internal accounting team.
Moderate Assurance: These statements offer a lower level of assurance compared to audited ones. They might have a few more uncertainties or errors, as they lack external validation.
Low Cost and Time Efficient: Preparing unaudited financial statements is relatively cost-effective and quicker. While they may not have the same level of external validation, they still provide valuable insights.

Ultimately, the choice between audited and unaudited financial statements depends on various factors, including the company's size and regulatory requirements. Regardless of the path chosen, the goal is to provide accurate financial insights and ensure transparency in financial reporting.

What Are the Unaudited Financial Statements Singapore Requirements?

Smaller companies in Singapore can opt for unaudited financial statements if they meet specific criteria. This means that it won't need an external auditor to review your financial reports. The eligibility criteria for audit exemption are outlined below:

Small Company

A small company can prepare unaudited financial statements if it meets the following conditions:

It operates as a private company in the current financial year.
It satisfies at least two out of the three quantitative criteria listed below 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.

- Total number of employees is less than or equal to 50.

A small company can maintain its status and prepare unaudited financial statements for subsequent financial years, as long as it remains eligible. However, disqualification can occur if the company stops being a private company at any point during a financial year, or if the company 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 your company is part of a group, additional criteria apply for audit exemption:

The company itself must qualify as a small company according to the criteria mentioned above.
The entire group of companies to which the company belongs must also be classified as a "small group."

To be considered a small group, the group of companies must meet at least 2 out of the 3 quantitative criteria on a consolidated basis for the immediate past two consecutive financial years.

How to Prepare Unaudited Financial Statements?

Preparing unaudited financial statements in Singapore involves several steps to ensure accurate and compliant financial reporting. While these statements are not subjected to external audits, they still play a crucial role in providing insight into a company's financial health.

Choose Accounting Standards: Decide between the Financial Reporting Standards for Small Entities (SFRS for Small Entities) or the full Singapore Financial Reporting Standards (SFRS).
Gather Financial Data: Compile accurate financial information, such as transaction records and bank statements.
Prepare Trial Balance: List all account balances from the general ledger to ensure a balance between debits and credits.
Generate Financial Statements: Based on the adjusted trial balance, generate the primary financial statements:

Summarizes the company's revenues, expenses, and net income or loss for the reporting period.
Presents the company's assets, liabilities, and equity at the end of the reporting period.
An overview of cash inflows and outflows during the period.

Include Disclosures and Notes: Provide additional context about the company's financial position and performance.
Internal Review: Review the statements for accuracy and include a management statement confirming compliance with chosen accounting standards.
Director's Approval: Obtain approval from the company's directors for the unaudited financial statements.
File and Distribute: File the financial statements with the Accounting and Corporate Regulatory Authority (ACRA) and share them with stakeholders. Do keep records of all related to the preparation of unaudited financial statements for future reference.

Who Can Prepare Unaudited Financial Statements?

As mentioned before, the one who can prepare unaudited financial statements is the company's internal accounting team, consisting of qualified accountants or financial professionals.

Even though unaudited financial statements don't undergo external audits, accuracy and compliance are still crucial as unaudited financial statements serve various purposes, including:

Applying for loans or seeking government grants.
Submitting taxes.
Conducting due diligence, especially during business investigations for activities like mergers, acquisitions, or joint ventures.
Demonstrating accountability to company shareholders.
Addressing matters in Annual General Meetings.
Meeting regulatory requirements in specific industries.
Achieving cost efficiency by avoiding the high expenses associated with external auditing.

Prepare Financial Statements Confidently with WealthBridge

Looking to navigate the complex landscape of financial reporting in Singapore? Look no further! At WealthBridge, our team of seasoned accounting professionals is here to guide you through the process.

Whether you need audited or unaudited financial statements, our qualified team specializes in Singapore's financial regulations and will ensure your financial statements are accurate and compliant. Let's work together to create financial reporting that aligns with your business objectives and enhances your financial credibility.