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From 2025, Malaysian SMEs May Qualify for Audit Exemption

Posted LnCoadmin

Good news! Eligible Malaysian SMEs can apply to be exempted from the annual statutory audit, easing operational burdens!

FAQs

1. What is Audit Exemption?

Audit exemption is a provision under the Malaysian Companies Act that allows eligible companies to submit unaudited financial statements without appointing an auditor.

2. Who is Eligible for Audit Exemption?

1. Sales Turnover
  • The annual revenue of the company during the current financial year and in the immediate past two financial years do not exceed RM3,000,000
2. Total Assets
  • The total assets of the company in the current statement of financial position and in the immediate past two financial years do not exceed RM3,000,000
3. Number of Employee
  • The number of employees at the end of the current financial year and in the immediate past 2 financial years do not exceed 30.
  • Not included – Full-time directors, shareholders who are also full-time employees, and family members or friends who do not receive a salary or have no fixed salary.

3. Implementation Phase

2025（Phase 1）

Financial Period: 1 January 2025 – 31 December 2025

Financial Statement Submission Year: Submission begins from 1 January 2026

Qualifying Criteria:

  • Revenue: Not exceeding RM1,000,000
  • Assets: Not exceeding RM1,000,000
  • Number of Employees: Not exceeding 10

 

2026（Phase 2）

Financial Period: 1 January 2026 – 31 December 2026

Financial Statement Submission Year: Submission begins from 1 January 2027

Qualifying Criteria:

  • Revenue: Not exceeding RM2,000,000
  • Assets: Not exceeding RM2,000,000
  • Number of Employees: Not exceeding 20

 

2027（Phase 3）

Financial Period: 1 January 2027 – 31 December 2027

Financial Statement Submission Year: Submission begins from 1 January 2028

Qualifying Criteria:

  • Revenue: Not exceeding RM3,000,000
  • Assets: Not exceeding RM3,000,000
  • Number of Employees: Not exceeding 30

4. Special Case

Dormant Company
  • The company has not commenced any business since its incorporation.
  • The company is dormant in both the current and previous financial years.

5. Companies NOT Eligible for Audit Exemption

  1. Exempted Private Companies
  2. Public or Listed Companies
  3. Subsidiaries of Public Companies
  4. Foreign Companies

6. Documents that need to be submitted

  1. Unaudited financial statements
  2. Directors’ report
  3. Directors’ declaration
  4. Statutory declaration
  5. Certificate confirming eligibility for audit exemption

7. Gentle Reminder

If your company grows in the future and no longer qualifies for the exemption, the exemption will end!

Financial years that previously qualified for the exemption will remain exempt and do not require an audit.

8. Advantages & Disadvantages

Advantages
  1. Reduce Costs
  2. Streamline Processes

 

Disadvantages
  1. It’s harder to apply for a loan
  2. Reduced trust from banks/investors
  3. Increase Tax Risk (More likely to be audited)

**Last Updated on 05.08.2025