Malaysia exempts small and medium enterprises from financial audits

In a statement on 18 December 2024, the Companies Commission of Malaysia (SSM) announced that the current criteria would remain in place until 03 December 2024, and would continue to apply to financial statements for periods beginning before 01 January 2025.

A statement issued by SSM said the following: “This step aligns with SSM's commitment to enhance the quality of auditing for financial statements in the country while reducing the compliance burden for private companies. These new criteria will benefit small and medium enterprises (SMEs), reduce compliance costs, and ensure that corporate governance practices remain efficient and transparent at the highest level.” 

The new audit exemption criteria for private companies in Malaysia were introduced through Practice Directive No 10/2024, titled Qualifying Criteria for Audit Exemption for Certain Private Companies in Malaysia, and was announced by the SSM on 16 December 2024.

The statement noted the new criteria underwent several rounds of consultations from February 2023 until June 2024, and received support from 88% of respondents.

SSM noted that companies seeking an audit exemption must meet any two of the following criteria: 

• Annual revenue not exceeding MYR 3 million in the current and two preceding financial years; 
• Total assets not exceeding MYR 3 million in the current and two preceding financial years; and 
• A total number of employees not exceeding 30 at the end of the current and two preceding financial years.

SSM added that a company is also eligible for an audit exemption if it has been dormant since its establishment, or dormant during the current period and the previous financial year.

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V Venkatachalam is a Fellow of the Association of Chartered Certified Accountants (FCCA), member of the Malaysian Institute of Accountants (MIA), a Fellow of the Chartered Tax Institute of Malaysia (FCTIM), a Chartered Member of the Institute of Internal Auditors Malaysia.  (CMIIA). He has been in practice for more than 30 years and is currently pursuing his doctorate.