Proposed New Audit Exemption Criteria for Private Companies in Malaysia

The Companies Commission of Malaysia (SSM) has recently proposed new audit exemption criteria for private companies where the private companies may qualify for an audit exemption if they have fulfilled any 2 of the 3 criteria, namely turnover, assets or number of employees for the current financial year and in the immediate past 2 financial years. The similar criteria have been adopted by various jurisdictions such as UK, Australia and Singapore.

Below are the proposed new audit exemption criteria in Malaysia and comparison with other jurisdictions:-

SSM believes that with the implementation of the proposed new audit exemption criteria will reduce administrative burdens and promote better growth for SMEs in Malaysia, improve the overall efficiency and quality of auditing services by focusing on those larger entities, balance between economic reliefs and regulatory requirements.

Currently, SSM welcomes public’s feedback on the proposed new audit exemption criteria. If you have any comment on this matter, you may provide your name and the organisation you represent (where applicable) together with your comments to be submitted by email by 8 March 2024 to lrpia@ssm.com.my.

Our comments:

Referring to the audit exemption threshold of other countries, SSM is proposing a lower threshold as compared to other countries which we are expecting more SMEs is going for audit exemption if this threshold being implemented. We do believe the proposed new audit exemption criteria can benefit both SMEs and audit firms. 

1. Reduce regulatory burdens and cost of business
   The SMEs with audit exempted can have more time to focus on growing the business as the Company is only required to prepare and lodge the unaudited financial statements which is the financial statements without the audit opinions. We believe this can reduce the regulatory burdens of the SMEs more than reducing the cost of business.
2. Better resources can be allocated by the audit firms
   The audit firms can have better resources, greater time availability to strengthen on the audit compliance of bigger entities and even provide more valuable professional services to serve the needs of SMEs. The requirement of preparing of unaudited financial statements is still allowing the firms to generate some income from there.

If you would like to know more about how this implementation can impact to your business, please feel free to contact us for further advise.