For small and medium-sized enterprises (SMEs) in Singapore, the word “audit” often brings a mix of anxiety and uncertainty. However, undergoing a business audit doesn’t have to be daunting. In fact, a well-managed audit can provide you with clarity, compliance assurance, and valuable insights into your financial health. Whether it’s your first time or you’re preparing for another cycle, understanding what to expect during a business audit can make the process smooth and stress-free.
In this guide, we walk you through the key stages of an audit, what documents you’ll need, how auditors work, and tips to prepare your SME effectively.
1. What Is a Business Audit?
A business audit is a formal examination of a company’s financial statements and internal controls by an independent external auditor. The objective is to determine whether the financial reports present a true and fair view of the company’s financial position, in accordance with Singapore Financial Reporting Standards (SFRS).
Not all companies are required to be audited. In Singapore, you may qualify for an audit exemption if you’re considered a small company under the Companies Act. But if your business:
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Has revenue or total assets over S$10 million, or
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Is part of a group of companies, then an audit may be mandatory.
Even if not legally required, many SMEs choose to be audited to support investor confidence, loan applications, or grant eligibility.
2. Key Phases of a Business Audit
The business audit process in Singapore generally consists of the following phases:
A. Planning and Preparation
The audit begins with a meeting between your management team and the auditor. This includes:
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Understanding your business model and internal processes,
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Assessing risk areas (e.g., revenue recognition, inventory),
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Reviewing prior-year financials and audit issues.
The auditor will then draft an audit plan outlining the areas of focus and documentation needed.
B. Fieldwork
During this stage, auditors visit your office (or conduct the audit remotely) to:
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Inspect supporting documents (invoices, contracts, receipts),
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Review your accounting policies and system controls,
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Confirm balances through third-party confirmations (e.g., banks, debtors).
This phase may take several days to weeks, depending on the complexity of your accounts.
C. Drafting the Audit Report
After reviewing the data, the auditor will:
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Highlight any material misstatements or discrepancies,
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Prepare the audit adjustments to your accounts,
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Draft the independent auditor’s report stating whether your financials are fairly presented.
D. Management Review and Finalisation
Your management team has the opportunity to review findings and clarify any issues. Once adjustments are agreed upon and the auditor is satisfied, the final audit report is issued.
3. Documents You’ll Need to Provide
To streamline your audit, prepare the following documents in advance:
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Financial Statements (Balance Sheet, Profit & Loss, Cash Flow Statement)
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General Ledger and Trial Balance
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Bank Statements and Bank Reconciliations
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Invoices and Receipts
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Payroll Records and CPF Contributions
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Fixed Asset Register
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Inventory Reports
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Loan Agreements and Contracts
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Tax Filings (Form C/C-S, GST Returns)
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Board Meeting Minutes (if applicable)
Having well-organised and complete records will reduce delays and potential red flags.
4. How Auditors Assess Your Business
Auditors don’t just “check numbers.” They assess how well your company controls and records financial transactions. They look for:
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Consistency in applying accounting policies,
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Evidence to support revenue, expenses, and asset valuations,
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Risk areas where misstatements or fraud might occur.
They also review your internal controls, such as:
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How cash is handled,
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Approval procedures for expenses,
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Segregation of duties.
If weaknesses are found, you’ll receive recommendations on how to tighten controls and reduce risk.
5. Common Issues Found During SME Audits
Many SMEs in Singapore face recurring audit challenges such as:
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Missing supporting documents,
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Inconsistent inventory records,
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Unreconciled bank balances,
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Incorrect or late tax filings,
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Improper recognition of revenue or expenses.
These issues can lead to audit qualifications or delays in the issuance of the audit report. Proactive bookkeeping and regular financial review can help mitigate them.
6. Timeframe for Completing an Audit
Typically, the audit process for SMEs can take anywhere from 2 to 6 weeks, depending on:
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The readiness of documents,
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Business complexity,
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Auditor availability.
It’s good practice to begin audit preparations at least 1–2 months before your AGM deadline, especially since Singapore companies must hold their AGM within 6 months of their financial year-end, and file Annual Returns within 7 months.
7. Benefits of a Successful Business Audit
Though it may seem like a regulatory task, there are substantial benefits to going through a business audit:
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Credibility: Shows stakeholders your finances are professionally reviewed and compliant.
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Financial Insight: Helps identify cash flow inefficiencies and profitability issues.
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Grant & Loan Readiness: Facilitates applications for government grants or bank loans.
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Fraud Detection: Audits can uncover irregularities that may have gone unnoticed.
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Exit Planning: Makes due diligence easier if you intend to sell or attract investors.
8. Working with a Trusted Audit Partner
Choosing a reliable and experienced audit firm is essential. An ideal audit partner should:
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Understand your industry and business structure,
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Be responsive and communicate clearly,
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Follow all ACRA and IRAS guidelines,
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Offer value-added advisory beyond just compliance.
At Koh & Lim Audit PAC, we specialize in SME audits and help Singapore companies prepare, execute, and benefit from their audit journey. Our approach is transparent, efficient, and business-friendly.
9. Pro Tips to Prepare for a Smooth Audit
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Digitise your records: Use accounting software like Xero or QuickBooks for easier access.
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Organise by month: Separate financial documents by month for better clarity.
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Stay updated: Keep your books up to date at least quarterly.
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Train your staff: Ensure your accounts team understands audit basics.
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Communicate early: Don’t wait till the deadline—engage your auditor early.
Conclusion
A business audit in Singapore doesn’t have to be a source of stress. With the right preparation and a trusted audit partner, it becomes an opportunity to improve your operations, demonstrate financial health, and gain a deeper understanding of your company’s strengths and risks.
For SMEs aiming to grow, attract funding, or simply stay compliant, embracing the audit process is a step in the right direction.
Need a professional audit partner for your SME in Singapore?
Contact Koh & Lim Audit PAC at +65 98638665 or email Tommyksh@kohlimaudit.sg to get started with a no-obligation consultation today.
