Financial Audit in Singapore: A Complete Guide to Statutory & Voluntary Audits

Roger Pay
Aug 20, 2023
4 min read

Updated: Dec 10, 2025

Singapore Audit: A Comprehensive Guide

Financial Audit in Singapore: A Complete Guide to Statutory & Voluntary Audits

What is a Financial Audit in Singapore? 🇸🇬

A financial audit in Singapore is a systematic and independent examination of a company's financial records and statements. Conducted by qualified accountants known as independent auditors, the primary goal is to provide an assurance that the financial statements are accurate and reliable, and that they adhere to the relevant legal and accounting standards.

In Singapore, the financial sector places a high emphasis on transparency and compliance, making the audit a critical process for all stakeholders.

The Two Main Types of Audits in Singapore

Businesses in Singapore typically encounter two main types of audits:

1. Statutory Audit (Mandatory by Law)

What it is: A compulsory audit for specific entities, most commonly limited companies (unless exempted, e.g., as a small company).
Purpose: To ensure the company's financial statements are prepared in accordance with the Singapore Companies Act and other applicable laws and regulations.

2. Voluntary Audit (For Assurance and Improvement)

What it is: An audit undertaken by a business even if not legally required.
Purpose: To obtain a third-party opinion on the financial health and reliability of records. It is often requested by owners, potential investors, or lenders who need assurance beyond internal checks.

The Singapore Audit Process: How is a Financial Audit Conducted?

The audit process in Singapore follows the Singapore Standards on Auditing (SSAs) and involves a meticulous, step-by-step approach:

Planning the Audit: The auditor meets with management to define the scope, identify areas of high financial risk, and determine the appropriate level of materiality (the threshold for what is considered a significant error).
Understanding the Business: The audit firm gains a deep understanding of the company's operations, financial reporting systems, and its internal controls.
Testing Internal Controls: The auditor assesses the effectiveness of the company's internal checks and balances (e.g., approval limits, segregation of duties) in preventing and detecting fraud and errors.
Substantive Testing of Transactions: A sample of transactions is selected and tested—examining supporting evidence like invoices, bank statements, and contracts—to ensure they are correctly recorded and supported.
Evaluating Financial Statements: The final financial statements are reviewed to confirm they comply with the applicable accounting standards (e.g., SFRS).
Issuing the Audit Report: The auditor provides a formal audit report expressing their professional opinion on whether the financial statements present a true and fair view.

Audit Procedure	Description
Inspection	Examining physical documents (invoices, contracts).
Observation	Watching company employees perform their duties.
Inquiry	Interviewing management and staff about procedures.
Confirmation	Obtaining written verification from third parties (banks, suppliers).
Analytical Procedures	Using financial ratios to identify unexpected trends or relationships.

The Importance and Benefits of an Audit in Singapore

Having a comprehensive Financial Audit in Singapore provides significant advantages beyond mere compliance:

Boosts Investor & Creditor Confidence: The audit report provides independent assurance that financial statements are accurate and reliable, building trust with investors, banks, and creditors.
Fraud and Error Detection: While not guaranteed to find everything, the audit process is specifically designed to uncover material misstatements, fraud, and systematic errors.
Enhances Internal Controls: Auditors often provide recommendations for improving a business's internal controls, leading to more efficient and secure operations.
Ensures Legal Compliance: It helps the company adhere to the strict requirements of the Companies Act and other regulatory bodies in Singapore.

Auditor's Role: What Auditors DO and DON'T Do

It's crucial for business owners to understand the defined role of an auditor in Singapore to maintain realistic expectations.

✅ What Auditors Do (Specific Responsibilities):

Provide an independent opinion on the fairness of the financial statements.
Gather sufficient and appropriate audit evidence.
Assess the effectiveness of internal controls.
Issue a formal, professional audit report.
Report material misstatements or non-compliance to management and, if necessary, to regulators.

❌ What Auditors Don't Do (The Non-Management Role):

Auditors are independent parties and are not part of the company's management. Therefore, they cannot:

Perform Management Tasks: They cannot authorize transactions, make business decisions (e.g., investment, hiring), or assume custody of company assets (like bank accounts).
Prepare or Change Source Documents: They rely on original source documents for evidence and cannot alter them.
Guarantee Accuracy: They provide an opinion based on testing; they cannot guarantee that the financial statements are free of all errors or fraud, only that they are free from material misstatements.
Provide Legal Advice: While highly knowledgeable, they are not lawyers and cannot offer legal consultation.

Partnering with an Auditing Firm

Financial Audit in Singapore: A Complete Guide to Statutory & Voluntary Audits

Choosing a qualified and experienced firm is essential for a smooth and effective audit. A professional firm like Bestar can assist by:

Simplifying the Audit Process: Guiding you through the preparation phase and ensuring necessary documentation is ready.
Ensuring Compliance: Conducting the audit in strict adherence to the Singapore Standards on Auditing (SSAs).
Offering Value-Added Recommendations: Providing insights on improving internal controls and financial reporting practices.