When Does a Digital Marketing Agency Need to Have Its Accounts Audited by an Audit Firm?

As the digital economy continues to grow, more businesses are relying on digital marketing agencies to help them build their online presence, manage ad campaigns, and drive leads through search engines and social media. With this rise in prominence, digital marketing agencies are becoming more structured, often scaling rapidly and managing large volumes of client funds, advertising budgets, and technology platforms.

As these agencies grow in size and complexity, the need for transparency and financial accountability also increases. One such method of ensuring this transparency is through a statutory or voluntary audit conducted by a certified audit firm. But when exactly does a digital marketing agency need to have its accounts audited?

In this article, we explore the key situations where a digital marketing agency would need to undergo an audit with Singapore Audit Firm, particularly within the context of Singapore’s business environment.

1. Statutory Audit Requirement Based on Company Size

In Singapore, not all companies are required to have their financial statements audited. The Companies Act provides for an audit exemption for “small companies.”

To qualify as a small company and be exempt from audit requirements, a company must meet at least two of the following three criteria for the past two consecutive financial years:

• Total annual revenue not more than S$10 million;
• Total assets not more than S$10 million;
• Number of employees not more than 50.

If a digital marketing agency exceeds these thresholds in two consecutive financial years, it loses its small company status and becomes subject to statutory audit. This applies regardless of whether the company is actively seeking funding or going through due diligence.

For instance, a digital marketing agency that has rapidly grown and now employs 55 people and earns annual revenue of S$12 million will fall outside the audit exemption and must appoint an audit firm to audit its financial statements.

2. Part of a Group of Companies

Even if a digital marketing agency qualifies as a small company on its own, it may still be required to undergo an audit if it is part of a group of companies and the group as a whole does not qualify as a small group under ACRA regulations.

A group is considered a small group if it meets at least two of the following criteria on a consolidated basis:

• Consolidated total revenue not more than S$10 million;
• Consolidated total assets not more than S$10 million;
• Total employees across the group not more than 50.

This is particularly relevant for agencies that are part of a holding structure or are subsidiaries of larger regional digital media conglomerates. If the group fails to meet the “small group” criteria, the agency will be mandated to perform an audit even if it is individually small.

3. Investor or Venture Capital Requirements

Many digital marketing agencies raise external capital to scale their operations—especially when expanding into new markets, developing proprietary ad tech, or acquiring other agencies. Investors, such as angel investors, venture capital (VC) funds, and private equity firms, often require independently audited financial statements before making an investment or as part of annual compliance.

Audited accounts give these investors confidence that the agency’s financials are presented fairly and reflect the actual state of the business. It’s also common for shareholders’ agreements or term sheets to mandate annual audits post-investment.

Even if not required by law, agencies may voluntarily engage an audit firm to build credibility and satisfy investor expectations.

4. Loan or Credit Facility Application

When applying for bank loans, government grants, or working capital facilities, financial institutions and grant bodies may require the latest two or three years of audited financial statements to assess the agency’s creditworthiness.

For example, Enterprise Singapore or ESG-related programs may ask for audited financials as part of their grant evaluation process. Likewise, banks prefer audited accounts when offering unsecured loans or trade lines.

In such situations, a digital marketing agency, especially one operating with significant cash flow cycles (e.g. paying ad spend on behalf of clients), may opt to get audited even if not legally required.

5. Client-Specific Requirements

Some large clients, especially multinational corporations or government agencies, may require their marketing service providers to provide audited financial statements. This is often part of vendor due diligence processes.

For example, if a digital marketing agency handles significant ad budgets on behalf of a listed company or a public sector agency, the client may require the agency to have clean, independently audited accounts to ensure accountability and avoid potential fraud.

In some cases, this requirement is baked into service-level agreements (SLAs) or tender documents. Not having audited accounts may disqualify the agency from bidding for lucrative contracts.

6. Internal Governance and Transparency

Even if not compelled by legal or external stakeholder requirements, some digital marketing agency owners voluntarily commission annual audits to ensure internal governance, accountability, and financial discipline.

This is especially common among agencies where:

• There are multiple shareholders or partners;
• The management team is separated from ownership;
• There are succession or ownership transfer plans in place;
• The company is preparing for an eventual IPO or merger.

Audited accounts provide confidence to shareholders and can prevent disputes related to profit distribution, valuation, and performance.

7. Preparation for Merger or Acquisition (M&A)

As the digital marketing industry matures, M&A activity is increasing. Whether the agency is being acquired or acquiring others, audited accounts are often a requirement during the due diligence phase.

Buyers want to see audited financial statements for the past 2–3 years to validate revenue, margins, assets, liabilities, and profitability. The absence of audited accounts can significantly reduce valuation or derail a transaction altogether.

Agencies aiming for acquisition or planning to merge with others are highly encouraged to audit their accounts proactively.

8. Tax Risk Mitigation and Compliance

While the Inland Revenue Authority of Singapore (IRAS) does not mandate audits for all companies, audited financial statements help reduce risk during tax filing and are useful in case of tax audits or disputes.

Having audited accounts ensures that revenue recognition, expense classification, and financial disclosures are in line with Singapore Financial Reporting Standards (SFRS). This reduces the chances of costly penalties, reassessments, or legal issues with IRAS.

Conclusion

While not every digital marketing agency in Singapore is legally required to audit its accounts, there are numerous situations where engaging an audit firm is either necessary or highly advisable. From Singapore statutory audit requirements due to size or group structure, to investor, lender, or client demands, to internal governance or M&A readiness—audits are a critical tool for ensuring credibility and financial health.

If you’re running a growing digital marketing agency, it’s worth speaking with a qualified audit firm like Koh & Lim Audit PAC to evaluate whether your business needs an audit, either now or in the near future.

Contact us today to schedule a consultation:

• 📞 Phone: +65 98638665
• ✉️ Email: Tommyksh@kohlimaudit.sg
• 📍 Address: 7500a Beach Road, The Plaza, #09-324, Singapore 199591
• 🌐 Website: https://kohlimaudit.sg