Copywriting for audited & unaudited annual financial statements

It takes a lot to run a successful business, and some of these things may or may not be up your alley. Among them may be money matters – finance, accounting or even funding issues. But as an entrepreneur, you need to be an all-rounder. Sure, you can hire people to do these things for you, but you should at least understand how these matters function so that you can make the right decisions or prevent your company from getting into trouble with the law.

In this article, we’ll take a look at financial statements.

Audited & Unaudited Annual Financial Statements

As their names imply, audited financial statements are prepared by an accountant and reviewed (audited) by an external accountant (auditor) to verify their accuracy. Unaudited financial statements are prepared by an accountant but not reviewed by external auditors. A set of audited financial statements increases creditor and investor confidence in the company’s transparency and integrity.

Why Do You Need Annual Financial Statements?

Financial statements reflect the company’s performance and financial status. It is the primary source of information about the company’s financial position for investors (existing and potential), creditors and other stakeholders.

More importantly, all Public Companies, Private Limited Companies, Subsidiary Companies and Singapore Branches of foreign companies are required to file their annual financial statements with Accounting and Corporate Regulatory Authority (ACRA). This is a requirement of the Singapore Companies Act. For detailed about annual filings, please refer to our article Filing of Annual Returns – What Do I Need To Do?

In addition, under sections 199 (2A) and 199 (1) of the Act, Company Director(s) are responsible for maintaining a system of internal accounting controls and keeping proper accounting and other records that will enable the preparation of true and fair financial statements.

Do You Need To Prepare Audited Financial Reports?

Your company’s accounts do not need to be audited by an external auditor if it is a “Small Company”. However, it is still required to file Annual Returns with ACRA.

Is My Company A “Small Company”?

Your Private Limited Company can qualify as a Small Company if it meets at least two of the following three criteria for immediate past two consecutive financial years: 

  • Total annual revenue does not exceed $10m;
  • Total assets do not exceed $10m; or
  • Number of employees does not exceed 50 at the end of the financial year. 

If your company is part of a group (defined as a holding company and its Subsidiary Companies) and wishes to qualify for audit exemption:

  • The company must be eligible as a Small Company; and
  • The entire group must also be a “Small Group”.

If your company outgrows the above criteria for two consecutive financial years, it will no longer be qualified as a “Small Company” or “Small Group”.

What’s Included In Unaudited Financial Statements?

Since most start-ups are likely to be a “Small Company”, we shall look at the requirements for unaudited financial statements. They include:

  • Directors’ Report
  • Directors’ Statement
  • Statement of Comprehensive Income (Income Statement or Profit & Loss Statement)
  • Statement of Financial Position (Balance Sheet)
  • Statement of Change in Equity
  • Statement of Cash Flow
  • Notes to the Financial Statements

Forming the first part of the statements is the Directors’ Report, which is compulsory when filing for Annual Returns. The director’s report should state the company’s profit or loss for the financial year; include a statement of the company’s affairs at the end of the financial year and names of directors in office, and disclose each director’s interests in the company. These need to be approved by a Director’s Resolution in writing and signed by at least two Directors. The Statement of Comprehensive Income provides information about your company’s turnover, expenses and profit within a period of a year. The Statement of Financial Position details the assets, liabilities and equities of the company at the point of closing of the statement.

About the Writer:

Judy Tham is a writer and founder of One Elephant, a copywriting firm in Singapore. She co-authored Are You Brand Dead?, one of the few books on branding in Asia that focuses on SMEs.