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01
Audit exemption does not mean no accounting
The audit exemption framework reduces audit cost and administrative burden for micro and small private companies. A qualifying company may elect not to have its financial statements audited for the relevant financial year.
Statutory audit
- A qualifying company may choose not to audit
- An auditor may not be required for that year
- The company may still appoint an auditor voluntarily
Accounting and filing
- Financial statements must still be prepared
- They must still be circulated to members
- Unaudited financial statements must still be lodged with SSM
02
Which Sdn. Bhd. companies may qualify?
Under PD10/2024, an eligible private company may elect audit exemption if it satisfies the relevant criteria. The assessment usually looks at company-level revenue, assets and full-time employees, with at least two out of three tests met.
Annual revenue
Assessed based on the relevant financial period, not simply cash flow or bank deposits.
Total assets
Assessed using financial statement values, which may be prepared under MPERS or MFRS.
Employee count
Based on full-time employees at the end of each relevant financial year.
Important: usually more than one year matters
SSM's FAQ explains that a company electing for the first time needs to assess the current and immediate past periods. A newly incorporated non-dormant company generally cannot immediately use PD10/2024 because it does not have two preceding years of financial information.
03
Which companies are excluded?
Not every private company can elect audit exemption. Structure and third-party requirements matter.
A private company that is a subsidiary of a public company is generally not eligible.
Where a company is part of a public company structure through joint control, SSM treats the public interest as higher and PD10/2024 is generally not available.
Foreign companies are excluded from the framework.
An exempt private company that lodges an EPC certificate instead of financial statements cannot also elect audit exemption.
Having corporate shareholders does not automatically disqualify a private company. If the company itself is a private company and satisfies the criteria, it may still qualify.
04
What must still be lodged with SSM?
An audit-exempt company still has to comply with Companies Act 2016 obligations to prepare, circulate and lodge financial statements.
Unaudited Financial Statements
The financial statements must still comply with applicable approved accounting standards.
Directors' Report
The directors' report must still be prepared and handled together with the relevant documents.
Certificate of Compliance
A certificate of compliance is required when the company elects audit exemption.
05
How do the 2025, 2026 and 2027 phases work?
PD10/2024 is not retrospective. It applies only to financial years starting on or after 1 January 2025. Financial statements commencing on or before 31 December 2024 remain under PD3/2017.
- 1
Check the financial period commencement date
The key date is when the financial period starts, not only the filing year or financial year end.
- 2
Identify the relevant phase
Use Phase 1 for 2025, Phase 2 for 2026, and Phase 3 for 2027 onwards unless the Registrar later reviews the thresholds.
- 3
Test current and past financial information
Revenue, assets and employees are usually assessed using the current and immediate past two financial years.
What if the company changed financial year?
SSM's FAQ states that where the financial period has changed, the company refers to the financial year as determined by its financial period. The immediate preceding financial period's revenue is taken in full, not apportioned separately.
06
Even if SSM criteria are met, an audit may still be needed
Audit exemption is an SSM framework for statutory audit. It does not force banks, licensing bodies, investors or government agencies to accept unaudited financial statements.
Banking and financing
Banks may ask for audited accounts to assess credit, risk and repayment ability.
Licence, grant or tender
Certain licences, grants, government projects or industry rules may still require audited financial statements.
Member or Registrar notice
If members or the Registrar issue a written notice requiring an audit, the company must have its accounts audited.
Therefore, do not decide based only on audit fee savings. Consider financing, licensing, governance, internal controls and future plans.
07
How is employee count determined?
SSM's FAQ uses full-time employees and looks at the number at the end of each relevant financial year.
Generally a paid worker working at least six hours a day for at least 20 days a month, or at least 120 hours a month.
Local employees, foreign employees, contract workers and employees under probation.
Directors or shareholders who also work full-time, and unpaid or irregularly paid family members or friends.
The count is taken at the end of each relevant financial year.
08
Who is responsible for determining eligibility?
SSM's FAQ states that the company is responsible for assessing its own eligibility. Directors should not apply the thresholds mechanically. They should also consider third-party obligations, unusual or complex transactions, risk profile, governance and internal controls.
Before deciding not to audit, ask your accountant, auditor or company secretary to review whether the thresholds are met, whether third-party requirements apply, whether records are complete and whether unaudited financial statements can be prepared and lodged on time.
09
Common questions from business owners
Can dormant companies use audit exemption?
Yes. SSM's FAQ says companies dormant since incorporation, or dormant in the current and immediate past financial year, can qualify.
Is a separate application to SSM required?
Generally no. A qualifying company may elect audit exemption, but it must lodge the required documents correctly.
What about holding companies and subsidiaries?
SSM's FAQ explains that PD10/2024 eligibility is generally assessed at individual company level. However, a public company subsidiary or public company joint-control situation is generally excluded.
Does audit exemption remove tax filing?
No. Audit exemption does not remove tax filing obligations. The company still needs to comply with LHDN requirements and maintain proper accounting records.
If an auditor was already appointed, must the auditor resign first?
SSM's FAQ states that there is no requirement for the appointed auditor to resign or be terminated before the company prepares and files unaudited financial statements.
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Official sources and disclaimer
This guide is for general educational purposes only and is not audit, accounting, tax or legal advice. Audit exemption eligibility, financial statement requirements, tax treatment and third-party requirements may differ based on facts and updated law. Obtain advice from qualified professionals before deciding.