Understanding your audit obligations is a fundamental part of running a Sendirian Berhad (Sdn Bhd) in Malaysia. While most private companies historically required annual audits, the landscape of audit services in Malaysia is shifting. Under the Companies Act 2016, the Registrar now provides an audit exemption framework for smaller companies, and these rules are significantly changing between 2025 and 2027. This guide explains exactly when your Sdn Bhd needs to engage an auditor and how the new exemption criteria affect you.
The General Rule: Mandatory Statutory Audit
Under the Companies Act 2016, every Sdn Bhd in Malaysia is generally required to appoint an approved auditor to conduct a statutory audit of its financial statements. To provide professional audit services in Malaysia, an auditor must be approved by the Ministry of Finance and be a member of the Malaysian Institute of Accountants (MIA). Their role is to provide an independent opinion on whether your financial statements show a “true and fair view” of your company’s financial position.
Who is Not Eligible for Audit Exemption?
Even if you meet the financial thresholds, certain entities are legally barred from claiming an exemption and must always seek statutory audit services in Malaysia. These include:
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Public Companies: Including listed entities.
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Subsidiaries: Private companies that are subsidiaries of public companies.
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Foreign Companies: Branches or companies registered as foreign entities in Malaysia.
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Exempt Private Companies (Section 260): Those that chose to lodge a certificate of status instead of financial statements.
The New Audit Exemption Criteria (Effective 2025)
The audit exemption framework first started in 2017 to help micro and small companies. Now, the rules are changing. Starting from 1 January 2025, a new three-phase approach will gradually raise the thresholds, making more companies eligible for exemption.
To qualify for an audit exemption for a financial period, your private company must meet at least two of the three criteria for both the current financial year and the immediate past financial year.
Here are the new, increasing thresholds:
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Phase 1 (Financial periods commencing on or after 1 Jan 2025)
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Annual Revenue: RM1,000,000 or less
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Total Assets: RM1,000,000 or less
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Number of Employees: 10 or less
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Phase 2 (Financial periods commencing on or after 1 Jan 2026)
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Annual Revenue: RM2,000,000 or less
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Total Assets: RM2,000,000 or less
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Number of Employees: 20 or less
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Phase 3 (Financial periods commencing on or after 1 Jan 2027)
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Annual Revenue: RM3,000,000 or less
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Total Assets: RM3,000,000 or less
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Number of Employees: 30 or less
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For example, if your company’s financial year starts on 1 April 2025, you will use the Phase 1 thresholds to check your eligibility. You must look at your figures for the years ending 31 March 2025 and 31 March 2026 to see if you qualify for exemption for the 2026 financial year.
What About Dormant Companies?
Yes, dormant companies can also adopt the audit exemption framework. A company qualifies if it has been dormant since incorporation, or if it was dormant in the current financial year and the immediate past financial year.
What Happens If You Claim Exemption?
If your company qualifies and you elect for an audit exemption, you are not completely free from filing obligations. You must still:
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Prepare financial statements that comply with approved accounting standards.
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Circulate these unaudited financial statements and a directors’ report to the company.
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Lodge the unaudited financial statements, the directors’ report, and a certificate of compliance with SSM within 30 days of circulation.
If your company no longer meets the criteria in a future year, you will lose your eligibility for exemption for that year and must appoint an auditor again.
Conclusion
Keeping up with audit requirements is essential for staying compliant and avoiding penalties. The new phased thresholds from 2025 offer welcome relief for many growing small and medium enterprises, but the rules for eligibility are specific.
At Consistant Info Sdn Bhd, we help businesses navigate these requirements with confidence. Whether your company needs a full statutory audit or you qualify for an exemption and need assistance with preparing and filing your unaudited financial statements, our team can provide the clear guidance you need.
Unsure if your company qualifies for an audit exemption? Contact us today at +60 11-2611 1773 for a consultation.