VCC Act 2018 — Section 90 auditor approval — Step-by-step walkthrough
The VCC Act 2018 requires every Variable Capital Company to appoint an auditor and have its financial statements audited, with no small-company exemption of the kind ordinary companies enjoy. Auditor appointment is therefore a mandatory early step for any VCC, and the auditor must be a public accountant or accounting firm approved to act in Singapore.
What the VCC Act 2018 requires on audit
Raffles Corporate Services works with a panel of corporate and employment law firms; this article is general information, not legal advice. For the authoritative text, refer to the Variable Capital Companies Act 2018 on Singapore Statutes Online.
Section 90 of the Variable Capital Companies Act 2018 deals with the appointment of auditors for a VCC. A defining feature of the VCC regime is that audit is compulsory: unlike ordinary companies, which may be exempt from audit if they qualify as small companies, every VCC must appoint an auditor and have its accounts audited annually. The directors must appoint the auditor within three months of incorporation.
The auditor must be a public accountant or an accounting entity registered under the Accountants Act 2004 and approved to act in Singapore. The audit gives investors and MAS independent assurance over the VCC’s financial statements, which are prepared under recognised accounting standards.
Who this applies to and which standards apply
The audit requirement applies to every VCC and, in an umbrella VCC, the financial statements are prepared for the umbrella with the sub-funds reflected within them. A VCC must prepare its financial statements using Singapore Financial Reporting Standards, International Financial Reporting Standards, or US GAAP, the flexibility on standards being a deliberate feature to accommodate international investors. The chosen framework must be applied consistently.
For a fuller treatment, read our companion guide: VCC Act 2018 — Section 46 Permissible Fund Manager rules — Step-by-step walkthrough.
Auditor eligibility and independence
Only a registered public accountant or approved accounting entity may act, and the auditor must be independent of the VCC and its manager. The auditor reports to members and has statutory rights of access to records and explanations. The Accounting and Corporate Regulatory Authority, which also oversees public accountants, administers the VCC framework at acra.gov.sg, and the Monetary Authority of Singapore’s VCC explainer is available at mas.gov.sg.
Cost and timeline — the numbers
The auditor must be appointed within 3 months of incorporation. A VCC audit typically costs from S$5,000 to S$15,000 a year for a straightforward single fund, with umbrella VCCs and complex portfolios costing considerably more. Audited financial statements must be prepared and laid before members annually; the audit fieldwork usually takes 3 to 6 weeks once the books are closed. Budget for the audit alongside fund-administration and corporate secretarial fees when modelling the VCC’s running costs.
Related reading: MAS Payment Services Act licensing — MPI and SPI — Step-by-step walkthrough.
Step-by-step: appointing and approving the auditor
Step 1 — Within 3 months of incorporation, the directors select a registered public accountant or approved accounting entity. Step 2 — Confirm the auditor’s independence from the VCC and its manager. Step 3 — Formally appoint the auditor by directors’ resolution. Step 4 — Choose the accounting framework, SFRS, IFRS or US GAAP, and apply it consistently. Step 5 — Close the books and provide the auditor full access to records. Step 6 — Receive the audit report and lay the audited statements before members. Step 7 — Reappoint or change the auditor as the Act provides. The statutory text is on Singapore Statutes Online at sso.agc.gov.sg.
Common mistakes and gotchas
The biggest misconception is that a VCC can claim the small-company audit exemption, it cannot; audit is mandatory. Others miss the three-month appointment deadline after incorporation. Appointing an auditor who is not a registered public accountant, or who lacks independence from the manager, invalidates the appointment. Switching accounting frameworks year to year, rather than applying one consistently, also creates problems at audit. Finally, leaving book-closing too late compresses the audit timetable and risks missing the annual reporting cycle.
Related guides
Audit obligations connect with the fund-administrator register duties and the director-residency and permissible-manager rules across the VCC Act 2018, covered in our companion deep-dives.
A worked example: appointing a VCC auditor after incorporation
A VCC registered in March must appoint its auditor by June, within three months of incorporation. The directors shortlist registered public accounting entities with fund-audit experience, confirm the chosen firm is independent of the VCC and its manager, and appoint it by directors’ resolution. The board selects International Financial Reporting Standards as its reporting framework, to suit overseas investors, and applies it consistently. After the first financial year, the books are closed and the auditor given full access; fieldwork takes about four weeks, and the audited financial statements are laid before members. Because no small-company exemption applies, this audit cycle repeats every year for the life of the VCC.
Reporting frameworks, umbrella accounts and members’ rights
A VCC may prepare its financial statements under Singapore Financial Reporting Standards, IFRS or US GAAP, a deliberate flexibility that lets managers align with the expectations of international investors. For an umbrella VCC, the financial statements are prepared at the umbrella level with each sub-fund’s position reflected within them, and the auditor’s opinion covers the whole. Members have the right to receive the audited statements, and the auditor has statutory rights of access to the VCC’s records and to explanations from its officers. Choosing a framework and then switching it year to year, rather than applying one consistently, creates avoidable audit friction.
Independence, removal and the cost of getting it wrong
The auditor must remain independent throughout the engagement; providing certain non-audit services to the same VCC can compromise that independence and the validity of the audit. Auditors may be removed or may resign only in accordance with the procedures the VCC Act 2018 provides, with appropriate notice to members. The consequences of non-compliance are real: failing to appoint an auditor within three months, attempting to claim an exemption that does not exist, or appointing an unqualified or non-independent auditor can expose the VCC and its officers to regulatory action and undermine investor confidence, the very thing the mandatory-audit regime exists to protect.
Key takeaways on the audit requirement
Audit is mandatory for every VCC: the small-company exemption available to ordinary companies simply does not apply, and the directors must appoint a registered public accountant or approved accounting entity within three months of incorporation. The auditor must be independent of the VCC and its manager and remain so throughout the engagement. A VCC may report under Singapore Financial Reporting Standards, IFRS or US GAAP, chosen to suit its investors and applied consistently rather than switched year to year. For umbrella VCCs, the audit covers the umbrella with each sub-fund reflected within the statements. Budget the audit, commonly S$5,000 to S$15,000 a year for a straightforward single fund, alongside administration and secretarial costs, and close the books promptly so the audit timetable is comfortable. The mandatory audit exists to give investors and MAS independent assurance, and the cost of getting it wrong is regulatory exposure and lost investor confidence.
FAQs
Can a VCC be exempt from audit?
No. Every VCC must appoint an auditor and have its financial statements audited annually. The small-company audit exemption available to ordinary companies does not apply to VCCs.
When must a VCC appoint its auditor?
The directors must appoint an auditor within three months of the VCC’s incorporation. The auditor must be a registered public accountant or approved accounting entity.
Which accounting standards can a VCC use?
A VCC may prepare financial statements under Singapore Financial Reporting Standards, IFRS or US GAAP, applied consistently, to accommodate international investors.
How much does a VCC audit cost?
Typically S$5,000 to S$15,000 a year for a straightforward single VCC, with umbrella structures and complex portfolios costing more.
Need help with this? Call, SMS or WhatsApp +65 8501 7133, or email hello@rafflescorporateservices.com. Raffles Corporate Services works with a panel of corporate and employment law firms; this article is general information, not legal advice.