Audit
Learn what an audit is, the main types, the audit process, and when Singapore businesses need one.
Published Monday 17 August 2026
Table of contents
Key takeaways
- An audit is a detailed inspection of tax returns, financial records or internal processes to check accuracy and compliance
- The main types include tax audits (conducted by IRAS), external audits (independent reviews for compliance or investor confidence) and internal audits (reviews of processes and controls)
- Most audits are conducted by an independent external party to maintain objectivity
- In Singapore, private companies can be exempt from a statutory audit if they qualify as a “small company” under the Companies Act
What is an audit?
An audit is a detailed inspection of tax returns, financial records, internal processes or operations to check their accuracy and compliance with regulations. The term usually refers to tax and financial audits, but audits also cover industry standards and statutory compliance.
Most audits are conducted by an independent external party. Even an internal audit is best handled objectively, with clear separation between the auditor and the processes being reviewed. This independence helps ensure findings are unbiased and credible.
Types of audits
Audits can be grouped into a few common categories based on their focus and who conducts them.
- Tax audit: IRAS can audit your tax returns, profit and loss statements and deductions to verify that your filings are accurate and complete
- External audit: an independent review of your finances or operations for compliance purposes, for example, checking for fraud, verifying records for a loan application or investor due diligence, or confirming you meet standards such as ISO certifications
- Internal audit: an internal team or external hire reviews your business processes and controls to identify weaknesses and areas for improvement
The audit process
Most audits follow four main stages, whether the review is conducted internally or by an external party.
- Planning: the auditor defines the scope, objectives and timeline for the audit
- Gathering information: the auditor collects relevant documents, records and data to review
- Evaluation: the auditor analyses the information to assess accuracy, compliance and any issues
- Audit report: the auditor documents findings, conclusions and recommendations in a formal report
Do businesses in Singapore need an audit?
Under the Companies Act, Singapore companies must have their financial statements audited unless they qualify for audit exemption as a “small company”. When you register a company in Singapore, understanding these requirements helps you plan ahead.
A private company qualifies as a small company if it meets at least two of the following conditions across the last two financial years:
- Total annual revenue of S$10 million or less
- Total assets of S$10 million or less
- 50 or fewer employees
Why audits matter
Audits mainly confirm that your business is compliant with tax and legal requirements. Beyond compliance, they help detect errors and fraud, improve decision-making by highlighting financial strengths and weaknesses, and boost your credibility with investors, lenders and suppliers.
How to prepare for an audit
Good preparation makes the audit process smoother and faster. Here are practical steps to get audit-ready.
- Maintain accurate, well-organised records throughout the year
- Keep tax records for at least five years (check with IRAS if your situation requires longer retention)
- Document and maintain policies and procedures for operational and industry audits
- Run periodic internal audits to monitor and improve your processes
- Stay compliant with legal and accounting regulations
Simplify audit prep with Xero
Keeping your financial records organised year-round makes audit time less stressful. Xero accounting software helps you track income and expenses, reconcile bank transactions, and store documents in one place, so your records are always audit-ready. Try Xero for your business and get one month free.
FAQs on audit
Here are answers to common questions about audits.
What is the main purpose of an audit?
The main purpose is to provide independent assurance that financial statements or processes are accurate, complete and compliant with relevant regulations or standards.
What is the difference between an internal and external audit?
An internal audit is conducted by someone within your organisation (or hired by you) to review processes and controls. An external audit is performed by an independent third party to verify compliance or financial accuracy for stakeholders such as regulators, lenders or investors.
Does my small business in Singapore need an audit?
If your company qualifies as a small company under ACRA’s criteria, you may be exempt from a statutory audit. However, you might still choose to conduct an internal audit or be required to provide audited statements for loan applications or investor reviews.
How long do I need to keep records for an audit?
IRAS requires you to keep tax records for at least five years. Certain situations, such as ongoing disputes or complex transactions, may require longer retention.
How often should a business be audited?
Companies that require a statutory audit must have their financial statements audited annually. Internal audits can be scheduled periodically based on your business needs and risk profile.
Related terms
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.