In a recent announcement from Companies Commission of Malaysia (“SSM”) on the Practice Directive No. 10/2024 dated 16 December 2024, and the earlier Practice Directive No. 3/2017 dated 4 August 2017 entitled “Qualifying Criteria for Audit Exemption for Certain Categories of Private Companies”, the qualifying criteria for audit exemption has been set out for certain private companies.
Issued pursuant to Section 20C of the Companies Commission of Malaysia Act 2001 and Subsection 267(2) of the Companies Act 2016 (“CA 2016”), this Practice Directive rolls out the qualifying criteria for private companies from having to appoint an auditor in a financial year i.e. audit exemption.
The Practice Directive No. 10/2024 and Practice Directive No. 3/2017 indicates that the following private companies are eligible for audit exemption:-
(a) dormant companies
(b) threshold-qualified companies
(c) zero-revenue companies *
* Zero-revenue companies only applicable for Financial Statements until the Financial year ended 31 December 2024.
i. A company is dormant in a financial year if
* “Accounting transaction” means a transaction, accounting or other records of which is required to be kept under section 245(1) of the Companies Act 2016, excluding a transaction arising from any obligations that the company is required to abide by any laws to pay and its related costs to comply.
ii. A dormant company is a private entity as defined by the Malaysian Accounting Standards Board (MASB) and the company is qualified for audit exemption if
iii. It shall take effect as follows:
i. A threshold-qualified company is a private entity as defined by the Malaysian Accounting Standards Board (MASB) and the company is qualified for an audit exemption if:-
it has annual revenue not exceeding RM100,000 during the current financial year and in the immediate past two (2) financial years;
its total assets in the current Statement of Financial Position (FS) does not exceed RM300,000 and in the immediate past two (2) financial years; and
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.
ii. It shall take effect for financial statements with annual periods commencing on or after 1 July 2018 until 31 December 2024
i. A threshold-qualified company is a private entity as defined by the Malaysian Accounting Standards Board (MASB) and the company is qualified for an audit exemption if the Company fulfills two out of three of the following criteria during the current financial year and in the immediate past (2) financial years:
it has annual revenue not exceeding the threshold**; or
it has total assets not exceeding the threshold**; or
it has total employees not exceeding the threshold**.
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