Why Singapore Companies Need a Sales Turnover Audit: Key Benefits and Requirements

Sales turnover is a crucial financial metric for businesses in Singapore, affecting everything from tax obligations and rental agreements to franchise fees and business valuations. Given its importance, a Sales Turnover Audit—also known as a Gross Turnover (GTO) Audit—is essential to ensure accuracy, compliance, and financial transparency.

In this article, we’ll explore why Singapore companies need a Sales Turnover Audit, the key benefits it offers, and the requirements businesses must meet to stay compliant.

1. What is a Sales Turnover Audit?

A Sales Turnover Audit is an independent review of a company’s reported sales revenue to verify its accuracy. This type of audit ensures that businesses:

• Accurately report their revenue for tax and compliance purposes.
• Fulfill financial obligations linked to sales turnover, such as rent and franchise fees.
• Prevent financial discrepancies that could lead to legal disputes.

A Sales Turnover Audit is particularly important for businesses that operate under revenue-based contracts, such as shopping mall tenants paying rent based on their gross turnover, or franchised businesses paying royalties based on revenue figures.

2. Why Do Singapore Companies Need a Sales Turnover Audit?

Singapore’s strict regulatory and financial environment makes accurate revenue reporting critical for businesses. Here are the key reasons why companies should conduct a Sales Turnover Audit:

a. Ensuring Compliance with IRAS (Inland Revenue Authority of Singapore)

The IRAS requires businesses to report accurate revenue for tax filings, including:

• Corporate Income Tax – Businesses must report their annual revenue correctly to avoid penalties.
• Goods and Services Tax (GST) – Companies registered for GST must ensure their sales turnover matches their GST filings.

Failure to report turnover accurately can result in fines, audits, or even legal action by IRAS. A Sales Turnover Audit helps companies stay compliant.

b. Verifying Revenue-Based Agreements (Rent, Royalties, and Commissions)

Many businesses operate under contracts where payments are based on sales turnover. Examples include:

• Retailers in shopping malls – Paying rent based on a percentage of gross turnover.
• Franchise businesses – Paying royalties to franchisors based on revenue.
• Hotels and F&B businesses – Paying commissions or revenue-sharing fees to landlords or partners.

A Sales Turnover Audit ensures that businesses pay the correct amounts under these agreements, preventing disputes and financial penalties.

c. Avoiding Revenue Underreporting or Overreporting Risks

• Underreporting sales turnover can lead to tax penalties, contract breaches, and loss of credibility.
• Overreporting revenue can mislead investors and stakeholders, creating unrealistic expectations.

A Sales Turnover Audit ensures that financial reports accurately reflect actual business performance.

d. Strengthening Business Credibility and Investor Confidence

Audited financial statements, including verified sales turnover, increase transparency and trust among investors, banks, and business partners. A company with accurate and audited financial reports is more likely to:

• Secure business loans and grants.
• Attract investors and business partners.
• Maintain a strong reputation in the market.

e. Preventing Legal and Financial Disputes

Discrepancies in reported revenue can lead to disputes with landlords, franchisors, tax authorities, and business partners. A Sales Turnover Audit acts as an independent verification tool that prevents costly legal battles and ensures that all stakeholders operate on accurate financial data.

3. Who Needs a Sales Turnover Audit in Singapore?

While all businesses benefit from accurate financial reporting, some industries require a Sales Turnover Audit due to contractual or regulatory obligations.

a. Retail Businesses and Shopping Mall Tenants

• Many shopping malls in Singapore charge tenants a base rent + a percentage of sales turnover.
• A Sales Turnover Audit ensures that the reported revenue figures are accurate and fair to both tenants and landlords.

b. Franchise Businesses

• Franchisees pay royalties based on sales turnover to franchisors.
• Franchisors often require an annual Sales Turnover Audit to verify that franchisees are reporting revenue correctly.

c. Hospitality, Restaurants, and F&B Businesses

• Hotels, restaurants, and cafes often operate under revenue-sharing agreements with landlords or management firms.
• A Sales Turnover Audit ensures compliance with these agreements.

d. Companies with Revenue-Based Licensing or Tax Requirements

• Some industries must report sales turnover for licensing fees or regulatory approvals.
• A Sales Turnover Audit ensures compliance with these requirements.

e. Businesses Seeking Loans or Government Grants

• Banks and government agencies may require audited financial statements before approving business loans or grants.
• A Sales Turnover Audit verifies revenue and increases the company’s financial credibility.

4. How is a Sales Turnover Audit Conducted?

A Sales Turnover Audit follows a structured process to ensure accuracy and compliance.

Step 1: Understanding the Business and Revenue Structure

• The auditor reviews the company’s revenue model, industry, and relevant agreements (e.g., rental or franchise contracts).

Step 2: Reviewing Financial Records

Key documents examined in a Sales Turnover Audit include:

• Sales invoices and receipts – To verify actual transactions.
• Bank statements – To ensure deposits match reported revenue.
• Point-of-sale (POS) system reports – To check recorded sales data.
• GST and tax filings – To confirm compliance with tax regulations.
• Rental or franchise agreements – To validate revenue-sharing obligations.

Step 3: Cross-Checking and Reconciling Sales Transactions

• Auditors cross-check financial records to identify discrepancies.
• Any errors or inconsistencies are investigated.

Step 4: Identifying and Addressing Discrepancies

• If misstatements are found, the company may need to adjust its records and update tax or contractual reports.

Step 5: Issuing the Audit Report

• The auditor provides a formal report confirming the accuracy of reported sales turnover.
• If required, adjustments must be made to ensure compliance.

5. How to Prepare for a Sales Turnover Audit?

A well-prepared business can streamline the audit process and avoid compliance risks. Here’s how:

a. Maintain Accurate Financial Records

• Ensure all sales transactions are properly recorded in an accounting system.
• Keep supporting documents like invoices, receipts, and contracts organized and accessible.

b. Conduct Internal Revenue Reconciliation

• Regularly compare reported sales turnover with bank deposits and POS data.
• Identify and correct discrepancies before the audit begins.

c. Understand Contractual and Tax Obligations

• Review rental, franchise, and licensing agreements to ensure revenue is reported correctly.
• Ensure GST and corporate tax filings align with reported sales turnover.

d. Engage a Professional Audit Firm

• Hiring an experienced audit firm ensures compliance with Singapore’s tax laws and financial regulations.
• Professional auditors provide guidance on best practices to avoid financial misstatements.

6. Conclusion

A Sales Turnover Audit is essential for ensuring financial accuracy, tax compliance, and contractual obligations in Singapore. Whether your business operates under turnover-based rent agreements, franchise royalties, or regulatory revenue reporting requirements, a properly conducted audit prevents disputes, financial penalties, and reputational damage.

By maintaining accurate financial records, implementing strong internal controls, and engaging professional auditors, businesses can avoid compliance risks and build trust with stakeholders.

If your company requires a Sales Turnover Audit in Singapore, consulting a qualified audit firm will help ensure that your financial records are accurate, compliant, and ready for regulatory review.

Koh & Lim Audit is a leading Singapore GTO Audit Services firm and Singapore Sales Turnover Audit Services Firm.