On 4 August 2017, the Companies Commission of Malaysia (SSM) brought into effect audit exemption for certain categories of private companies. Companies that satisfy the criteria set forth shall not be required to appoint an approved auditor to prepare and audit their financial statements before lodging them with the SSM. 

Companies electing for audit exemption are required to lodge a full set of an unaudited financial statements accompanied with a statement that the company is qualified for audit exemption and that the company receives no request from its shareholders that audit must be conducted for a particular year.

According to SSM, the following categories of private companies qualify for audit exemption:

  • A dormant company qualifies for audit exemption if it has been dormant from the time of its incorporation; or it is dormant throughout the current financial year and in the immediate preceding financial year.
  • A zero-revenue company is qualified for audit exemption if it does not have any revenue during the current financial year; it does not have any revenue in the immediate past two financial years; and its total assets in the current Statement of Financial Position (FS) does not exceed RM300,000 as well as in the FS of the immediate past two financial years.
  • A threshold-qualified company is qualified for an audit exemption if it fulfills the following criteria-
      1. It has revenue not exceeding RM100,000 during the current financial year and in the immediate past two (2) financial years;
      2. Its total assets in the current Statement of Financial Position does not exceed RM300,000 and in the immediate past two (2) financial years;
      3. It has, at the end of its current financial year and in each of its immediate past two (2) financial years’ end, not more than five (5) employees.

The rationale for the criteria adopted by the Registrar in exempting audit is based on the approaches that comprised a combination of both economic structure and size of leading jurisdictions which have successfully implemented audit exemption policy, in addition to the consultation conducted by SSM for four months ending 28 February 2017. Feedbacks from stakeholders comprising 61% audit/accounting/related professional firms and 39% from the public, showed that more than 65% of the respondents agreed with the audit exemptions proposal.