Understanding Gross Turnover Audits in Singapore: Who Needs It & What to Expect?

Introduction

In Singapore, businesses operating under revenue-linked contracts—such as shopping mall tenants, franchisees, and companies applying for funding—often need to undergo a Gross Turnover (GTO) Audit. This audit ensures that a company’s reported sales figures accurately reflect actual revenue and that financial obligations, such as rental payments or franchise royalties, are correctly calculated.

Failing to comply with a GTO audit can result in financial penalties, disputes with landlords or franchisors, and legal complications. In this article, we will explore who needs a GTO audit in Singapore, what the process involves, and how businesses can prepare for a seamless audit experience.

1. What is a Gross Turnover (GTO) Audit?

A Gross Turnover Audit (GTO Audit) is an independent review of a business’s sales revenue to confirm that it aligns with reported financial records. It is conducted by Certified Public Accountant (CPA) firms and helps stakeholders—such as landlords, franchisors, banks, and investors—ensure financial transparency.

The audit primarily focuses on:
✅ Verifying total sales turnover for rental or franchise fee calculations.
✅ Ensuring compliance with contractual agreements (e.g., lease agreements, franchise contracts).
✅ Preventing financial disputes caused by inaccurate revenue reporting.

2. Who Needs a GTO Audit in Singapore?

A GTO audit is required for businesses that operate under agreements where revenue affects rental costs, franchise payments, or financial obligations.

A. Retail & F&B Businesses in Shopping Malls

📌 Why? Many shopping malls in Singapore charge Gross Turnover Rent (GTO Rent), meaning tenants pay rent based on a percentage of their sales. Malls require an independent audit to verify the reported revenue.

📌 Example: A retail store in a mall has a lease agreement stating it must pay 5% of its monthly gross turnover as rent. A GTO audit ensures that the business is paying the correct amount.

B. Franchise Businesses

📌 Why? Franchisees pay royalties to franchisors based on a percentage of their sales. A GTO audit ensures franchisees do not underreport revenue, which would reduce royalty payments.

📌 Example: A fast-food franchise reports a monthly revenue of $200,000. If the royalty fee is 6% of revenue, the franchisee must pay $12,000 in royalties. A GTO audit verifies this calculation.

C. Businesses Applying for Loans or Grants

📌 Why? Some banks, investors, and government grant agencies require proof of revenue through an independent audit before approving funding.

📌 Example: A company applying for an SME loan must provide audited sales figures to demonstrate financial stability.

D. Companies with Revenue-Linked Agreements

📌 Why? Any business with a contract that requires revenue-based payments (e.g., supplier agreements, profit-sharing contracts) may need a GTO audit.

📌 Example: A business paying royalties to an international partner based on its Singapore sales may need an audit to ensure accurate reporting.

3. What to Expect During a GTO Audit

A GTO audit typically involves a detailed review of financial documents, sales records, and transactions. Here’s what businesses can expect:

Step 1: Engagement with a CPA Firm

• Businesses must hire a Certified Public Accountant (CPA) firm to conduct the audit.
• The CPA firm will review contracts, lease agreements, and revenue-based obligations.

Step 2: Financial Data Collection & Review

• Sales Invoices & Receipts – Used to verify recorded transactions.
• Point-of-Sale (POS) Reports – Ensures sales data aligns with financial records.
• Bank Statements & Credit Card Transactions – Cross-checked against reported revenue.
• E-commerce & Online Sales Reports (if applicable) – Used for businesses selling online.

Step 3: Identifying Discrepancies

• Auditors check for missing transactions, errors, or potential underreporting.
• If discrepancies are found, businesses may need to provide explanations or supporting documents.

Step 4: Audit Report Issuance

• The audit firm issues a formal GTO Audit Report, which is submitted to relevant stakeholders (e.g., landlords, franchisors, financial institutions).

4. Consequences of Failing a GTO Audit

Non-compliance with a GTO audit can lead to serious financial and legal consequences, including:

❌ Financial Penalties & Fines – Businesses may face additional fees or back payments if revenue was underreported.
❌ Lease Termination – Shopping malls can terminate rental agreements for businesses that fail to comply.
❌ Legal Disputes – Franchisors or landlords may take legal action against businesses that violate revenue reporting requirements.
❌ Loss of Business Credibility – Banks, investors, and partners may lose trust in a business’s financial integrity.

5. How to Prepare for a GTO Audit

Businesses can proactively prepare for a GTO audit by following these best practices:

✅ Maintain Accurate Sales Records

• Use a POS system or accounting software to record every transaction.
• Ensure daily sales reports match actual transactions.

✅ Reconcile Bank Deposits & Sales Reports

• Regularly compare bank statements with recorded revenue.
• Ensure cash sales, credit card payments, and digital transactions align with reports.

✅ Organize Financial Documents in Advance

• Keep all invoices, sales receipts, and accounting records readily accessible.
• Implement monthly internal audits to verify financial data.

✅ Engage a Reliable Audit Firm

• Choose an audit firm with experience in retail, F&B, and franchise businesses.
• Ensure the firm provides clear audit reports and professional guidance.

6. Choosing the Right Audit Firm for a GTO Audit in Singapore

When selecting a GTO audit firm, businesses should consider:

🔹 Accreditation & Licensing – Ensure the firm is a Certified Public Accountant (CPA) firm.
🔹 Industry Expertise – Choose an auditor with experience in retail, F&B, and franchising.
🔹 Clear & Transparent Reporting – A good audit firm provides detailed audit findings and recommendations.
🔹 Reputation & Client Testimonials – Check for past client reviews and success stories.

7. Conclusion

A GTO Audit is essential for businesses in Singapore that operate under revenue-based agreements, including mall tenants, franchise businesses, and companies seeking funding. It ensures accurate financial reporting, prevents revenue disputes, and maintains business compliance.

By keeping accurate financial records, reconciling revenue with bank transactions, and engaging a trusted CPA firm, businesses can successfully complete their GTO audits and stay compliant.

If your business requires a GTO Audit in Singapore, consult a licensed audit firm today to ensure financial transparency and compliance. ✅