On 16 December 2024, the Companies Commission of Malaysia (“SSM”) issued a new Practice Directive No. 10/2024 – Qualifying Criteria for Audit Exemption for certain private companies in Malaysia.
Are financial statements still required for audit-exempt companies? The answer is YES. If a company meets the audit exemption criteria, the company still needs to prepare the full set of financial statements WITHOUT the auditors’ opinion in order to fulfil the SSM and tax filing requirements.
The primary benefit for audit-exempt companies is the reduction in time spent liaising with the auditors, as they will no longer be required to conduct audit work. However, an audit-exempt company is still needed to prepare and submit the full set of financial statements to relevant authorities, without the need for auditor verification.
So, is your company eligible for audit exemption?
According to the new Practice Directive No. 10/2024, if a private company fulfills at least two (2) of the following criteria, the Company will qualify for audit exemption:
- The annual revenue of the company during the current financial year and in the immediate past two (2) financial years do not exceed RM3,000,000;
- The total assets of the company in the current statement of financial position and in the immediate past two (2) financial years do not exceed RM3,000,000; or
- The number of employees at the end of the current financial year and in the immediate past two (2) financial years do not exceed thirty (30).
The threshold criteria for audit exemption will be implemented via 3 phases to facilitate the transition into a new audit framework.
Implementation phases ：
| Year | 2025 Phase 1 | 2026 Phase 2 | 2027 Phase 3 |
|---|---|---|---|
| Financial period | Commencing on or after 1st January 2025 until 31 December 2025 | Commencing on or after 1st January 2026 until 31 December 2026 | Commencing on or after 1st January 2027 |
| Submission year | Beginning from 1 January 2026 | Beginning from 1 January 2027 | Beginning from 1 January 2028 |
Thresholds (fulfill any 2 out of 3) :
| Year | 2025 Phase 1 | 2026 Phase 2 | 2027 Phase 3 |
|---|---|---|---|
| 1) Turnover | RM1,000,000 | RM2,000,000 | RM3,000,000 |
| 2) Assets | RM1,000,000 | RM2,000,000 | RM3,000,000 |
| 3) Number of employees | 10 | 20 | 30 |
The annual revenue, total assets and number of employees for the immediate past two (2) financial years must not exceed the maximum threshold specified for the respective corresponding phase.
The exemption under this Practice Directive will not apply to:
- an exempt private company which has opted to lodge a certificate relating to its status as an exempt private company to the Registrar under section 260 of the Companies Act 2016;
- a public company including a listed company;
- a private company that is a subsidiary of a public company; and
- a foreign company.
Great news if your company qualifies for audit exemption! However, you’ll still need to prepare a full set of financial statements to meet regulatory requirements. If you need assistance or are seeking relevant services, don’t hesitate to reach out to us. We’re here to help!
