CLG Audit Requirements

CLG Audit Requirements | Bestar

CLG Audit Requirements

In Singapore, a company limited by guarantee (CLG) is required to have its financial statements audited annually, regardless of its income or expenditure. This requirement is stipulated under the Companies Act and applies to all CLGs, including charities.

The audit requirement is in place to ensure transparency and accountability in the financial management of CLGs. It helps to safeguard the interests of the members and the public by providing an independent assessment of the CLG's financial position and performance.

Therefore, even if a charity is a CLG and has minimal income or expenditure, it must still comply with the audit requirements under the Companies Act.

Here's a breakdown of why CLGs in Singapore must have their financial statements audited, regardless of income or expenditure:

• Companies Act Requirement: The Companies Act of Singapore mandates that all companies limited by guarantee, including charities, undergo an annual audit of their financial statements. This applies regardless of the organization's size, income, or expenditure.

• Transparency and Accountability: Audits promote transparency and accountability in the financial management of CLGs. This is crucial for maintaining public trust, especially for charities that rely on donations and public funds.

• Protection of Stakeholders: Audits protect the interests of the CLG's members, donors, and beneficiaries by ensuring that financial information is accurate and reliable. This helps prevent fraud and mismanagement of funds.

• Independent Assessment: An independent audit provides an objective evaluation of the CLG's financial position and performance. This helps stakeholders make informed decisions about their involvement with the organization.

Key Points to Remember:

• No Exemption: There is no exemption from audit requirements for CLGs in Singapore, even if they have minimal financial activity.

• Qualified Auditors: Audits must be conducted by qualified public accountants registered with the Accounting and Corporate Regulatory Authority (ACRA).

• Annual Requirement: Audits must be performed annually, and the audited financial statements must be presented at the CLG's Annual General Meeting (AGM).

Additional Considerations:

• Charity-Specific Regulations: In addition to the Companies Act, charities in Singapore may also be subject to regulations under the Charities Act, which may include further requirements for financial reporting and audits.

• Good Governance: Even if a CLG has minimal financial activity, conducting an audit demonstrates good governance and commitment to transparency, which can enhance public trust and confidence.

How Bestar can Help

Bestar plays a crucial role in ensuring the financial health and accountability of charities, particularly those structured as companies limited by guarantee (CLGs). Here's how we help:

1. Independent Financial Examination:

• Compliance with Regulations: Bestar ensures that the charity's financial statements comply with the Companies Act and the Charities Act, which have specific reporting requirements for CLGs.

• Accuracy and Reliability: We conduct a thorough examination of the charity's financial records and transactions to ensure accuracy, completeness, and reliability of the financial information.

• Objective Assessment: Bestar provides an independent and objective assessment of the charity's financial position, performance, and cash flow, giving stakeholders a clear picture of its financial health.

2. Enhancing Transparency and Accountability:

• Building Trust: An audit by a reputable firm enhances the charity's credibility and trustworthiness in the eyes of donors, beneficiaries, and the public.

• Promoting Good Governance: Bestar can help identify weaknesses in internal controls and make recommendations for improvement, promoting good governance and financial management practices.

• Deterring Fraud: The presence of an independent auditor acts as a deterrent to fraud and financial mismanagement, safeguarding the charity's resources.

3. Providing Valuable Insights:

• Financial Health Check: Bestar can provide insights into the charity's financial strengths and weaknesses, helping the board make informed decisions about resource allocation and strategic planning.

• Risk Management: We can identify potential financial risks and recommend strategies to mitigate them, ensuring the long-term sustainability of the charity.

• Best Practices: Bestar stays updated with the latest accounting standards and best practices, providing valuable guidance to the charity on financial management.

4. Facilitating Stakeholder Engagement:

• Meeting Reporting Requirements: Audited financial statements help the charity meet its reporting obligations to regulatory bodies and stakeholders.

• Communicating with Donors: Transparent and reliable financial information helps build trust with donors and encourages continued support.

• Engaging with Beneficiaries: By demonstrating financial accountability, charities can strengthen their relationship with beneficiaries and the communities they serve.

Choosing Bestar:

When selecting an auditor, charities should consider the following:

• Experience and Expertise: Bestar has experience in the non-profit sector and a strong understanding of the specific regulations governing charities.

• Reputation and Independence: Reputable Bestar has a strong track record and ensure their independence to maintain objectivity.

• Communication and Collaboration: Bestar communicates clearly and is willing to work collaboratively with the charity's board and management.

By engaging qualified and experienced Bestar, charities can ensure financial transparency, accountability, and good governance, ultimately strengthening their ability to fulfill their mission and serve their beneficiaries effectively.