Who Needs Audit Services?

Audit services play a crucial role in modern economies by enhancing transparency, strengthening internal controls, and ensuring compliance with financial and regulatory frameworks. While many associate audits primarily with large corporations, a wide range of entities across industries and sectors can benefit from or are legally required to undergo audits. In this article, we explore who needs audit services, why they are important, and how audits help different types of organizations operate effectively and responsibly.

1. Companies Mandated by Law

a. Public Companies (Listed Companies)

Publicly listed companies are legally required to undergo annual financial audits. This is to ensure that their financial statements are accurate, comply with financial reporting standards, and provide shareholders and the public with a fair view of the company’s financial position.

In jurisdictions like Singapore, companies listed on the Singapore Exchange (SGX) must submit audited financial reports. These reports are scrutinized by investors, analysts, and regulators.

b. Private Companies (Based on Size Criteria)

While many small private companies may be exempt from mandatory audits, medium and large companies are often required by law to have their accounts audited. In Singapore, the Companies Act mandates that private companies that do not meet the “small company” exemption must appoint an auditor and submit audited financial statements annually.

To qualify as a small company in Singapore, a company must meet at least 2 of the following 3 criteria:

• Total annual revenue ≤ S$10 million

• Total assets ≤ S$10 million

• Number of employees ≤ 50

If a company exceeds these thresholds, audit becomes compulsory.

2. Non-Profit Organizations (NPOs) and Charities

Non-profits and charities are often subject to audit requirements, especially when:

• They receive funding or grants from the government

• They manage public donations

• They are registered as Institutions of a Public Character (IPC) in Singapore

Audits for non-profits help ensure financial accountability, promote transparency, and maintain donor confidence. Regular audits also demonstrate that funds are being used for their intended purposes, reducing the risk of misuse or fraud.

3. Government Agencies and Statutory Boards

Government organizations and statutory boards are held to high standards of accountability. They are typically required to conduct regular audits to ensure public funds are used appropriately.

For example, in Singapore, the Auditor-General’s Office (AGO) conducts independent audits of government ministries, statutory boards, and government-owned companies.

4. Companies Applying for Government Grants

Many businesses apply for grants and financial incentives offered by government agencies. These grants often come with conditions that require recipients to submit audited financial statements or grant usage reports audited by an independent auditor.

Examples of such grants in Singapore include:

• Enterprise Development Grant (EDG)

• Productivity Solutions Grant (PSG)

• Market Readiness Assistance (MRA)

Having audited statements increases the chance of successful grant applications and ensures compliance with grant disbursement rules.

5. Startups Seeking Investment or Acquisition

Startups may not be legally required to have audits, especially in their early stages. However, when they begin seeking venture capital, private equity, or are preparing for an exit through acquisition, audited financial statements become essential.

Investors want to ensure the company is financially healthy, and they rely on audited accounts to assess the startup’s viability. Audits also uncover internal control issues or financial misstatements that can affect a startup’s valuation.

6. Companies with Overseas Expansion or Multinational Operations

Businesses with international operations or subsidiaries in other countries often need to comply with local audit regulations. Additionally, for consolidated group reporting purposes, group auditors may require the subsidiary’s accounts to be audited so that they can consolidate them into the group’s financial statements.

This is especially common for Singapore subsidiaries of foreign parent companies, where the group’s consolidated financial statements need to meet international audit standards.

7. Licensed and Regulated Entities

Certain industries are regulated by government bodies and financial regulators and are required to undergo audits to maintain their licenses. Examples include:

a. Financial Institutions

• Banks

• Insurance companies

• Fund management companies

These are regulated by bodies such as the Monetary Authority of Singapore (MAS), which requires regular audits to ensure stability and compliance with financial laws.

b. Licensed Employment Agencies

In Singapore, licensed employment agencies, especially those dealing with foreign domestic workers or higher-tier services, are often required to submit audited accounts to the Ministry of Manpower (MOM) to maintain their licenses.

c. Educational Institutions

Private schools, tuition centers, and institutions offering government-accredited courses may be required to submit audits, particularly when they receive subsidies or offer SkillsFuture courses.

8. Management Corporations (MCSTs)

In Singapore, Management Corporation Strata Titles (MCSTs), which manage condominiums and commercial properties, are required to appoint auditors to review their accounts annually. This ensures transparency and accountability to property owners, especially in handling maintenance funds and sinking funds.

9. Societies and Clubs

Societies and clubs registered under the Registry of Societies (ROS) in Singapore are generally required to submit audited financial statements annually as part of their annual filing. This includes religious organizations, clan associations, sports clubs, and social groups.

10. Franchise Businesses

Franchisees and franchisors may agree contractually to conduct audits, particularly:

• To validate royalty payments

• To confirm compliance with the franchise agreement

• To assess the financial health of franchisees

Such audits help ensure that all parties are upholding their end of the agreement and help maintain brand consistency and trust.

11. Businesses in High Cash Flow or Inventory-Heavy Industries

Businesses that handle large volumes of cash or inventory, such as:

• F&B outlets

• Retail stores

• Construction companies

…are more susceptible to fraud and mismanagement. Even if not legally required, such businesses often engage audit services to reduce the risk of theft, leakage, or operational inefficiencies.

12. Companies in the Process of IPO or Public Listing

Before a company can go public, it must prepare and submit audited financial statements for several past years. This is part of the due diligence process and helps ensure that investors have access to reliable and transparent information.

13. Family-Owned Businesses and SMEs with Succession Planning

Family businesses often need audits when preparing for generational transfer or when attracting external management or investors. Audits help:

• Clarify the company’s financial position

• Identify areas for improvement

• Ensure fair valuation during transitions

It’s also a way to prevent internal conflicts by providing objective financial data.

Conclusion

Audit services are not limited to large, publicly listed companies. From non-profits to startups, family businesses to government agencies, a wide range of organizations require or benefit from audits. Whether it’s to comply with laws, build trust with investors, apply for government grants, or improve internal controls, audit services serve as a critical function in today’s complex and regulated business landscape.

Engaging an experienced and reputable audit firm can make a significant difference—not just in meeting statutory obligations, but also in strengthening your organization’s governance, operations, and long-term sustainability.

Visit https://www.auditservices.sg/ for audit services help.