Private companies in Malaysia (Sdn. Bhd.) can be exempted from mandatory audit if they meet specific criteria under Practice Directive 10/2024 from the Companies Commission of Malaysia (SSM/CCM), effective from January 1, 2025. Eligible companies—dormant, zero-revenue, or threshold-qualified—must satisfy at least two of the following requirements:
-
- annual revenue of RM3 million or less,
- total assets of RM3 million or less, or
- employees of 30 or less.
The above requirements are implemented in phases as explained in the below paragraphs.
Private companies meeting the requirements are not required to appoint an auditor. At minimum, the appointment of qualified accountant registered with Malaysian Institute of Accountants (MIA) is required to meet the basic requirement of the preparation of financial statements in accordance with approved accounting standards, issuance of Audit Exemption Certificate and meeting provision of the companies act 2016 as directed by the authorities. In this case, the qualified accountant is assuming the compliance role that was traditionally undertaken by external auditor in ensuring the financial statements are in compliance with the laws and regulation in Malaysia.
Key Audit Exemption Categories (Effective 2025)
The Companies Commission of Malaysia (SSM/CCM) categorizes exempted private companies into three types:
-
- Dormant Companies: Companies that have been inactive since incorporation or were inactive throughout the current and immediate past financial year.
- Zero-Revenue Companies: Companies with no revenue during the current and immediate past two financial years, with total assets of RM300,000 or less.
- Threshold-Qualified Companies: Companies that meet at least two of the following criteria for the current and past two financial years:
- Annual revenue of RM3 million or less.
- Total assets of RM3 million or less.
- Employees of 30 or less.
- Phased Implementation (2025-2027)
The new thresholds are being phased in to ease the transition:
-
- 2025: Revenue/Assets of RM1Million or less, Employees of 10 or less.
- 2026: Revenue/Assets RM2M or less, Employees of 20 or less.
- 2027: Revenue/Assets RM3M or less, Employees of 30 or less.
Exceptions to Exemption
-
- Shareholder Request: Shareholders holding at least 5% of total shares can request an audit, which the company must comply with.
- SSM Demand: The SSM may issue a written notice requiring a company to audit its accounts.
Important Reminders
-
- Financial Reporting: Even if exempt from audit, companies must still prepare and lodge financial statements based on approved accounting standards and companies act 2016, and tax returns.
- Directors responsible for financial management of the company are required to issue a Certificate of Audit Exemption. It is a declaration by the directors that the company meet all requirement for audit exemption, and the financial statements are prepared in accordance with approved accounting standards and the companies act 2016.
- Dormant Company Eligibility: Dormant companies must be truly inactive to qualify, meaning they have not had any accounting transactions.
- Annual Return: An annual return submitted to the SSM for an exempted company should not show the name or details of an auditor.
We, Megat Faizal Musa & Co., a firm of Chartered Accountants and a Member Firm of Malaysian Institute of Accountants, specializes in Accounting and Secretarial Services. Contact us at customerservice@mfmco.my for more information.