(Audit Update) Audit Exemption 2025: Key Changes for Sdn Bhd Companies

The Companies Commission of Malaysia has introduced Practice Directive No. 10/2024, which significantly updates the criteria for audit exemptions for private companies. These changes, effective for financial periods beginning on or after January 1, 2025, aim to simplify compliance for small and medium industries (SMIs).

Here’s what you need to know to take advantage of this new directive.

Key Highlights of Practice Directive No. 10/2024

1. Updated Qualifying Criteria for Audit Exemption
Private companies can now qualify for audit exemptions if they meet at least two of the following criteria:

  • Revenue Threshold: Annual revenue does not exceed RM3 million for the current and past two financial years.

  • Asset Threshold: Total assets do not exceed RM3 million in the current and past two financial years.

  • Employee Count: Total employees do not exceed 30 at the end of the current and past two financial years.

These thresholds are being phased in over three years:

  • 2025: RM1 million revenue and asset limits, 10 employees.

  • 2026: RM2 million revenue and asset limits, 20 employees.

  • 2027: RM3 million revenue and asset limits, 30 employees.

The submission years for the phased audit exemption thresholds outlined in the attachment are as follows:

  • Phase 1 (2025 Thresholds): Submission begins from 1 January 2026.

  • Phase 2 (2026 Thresholds): Submission begins from 1 January 2027.

  • Phase 3 (2027 Thresholds): Submission begins from 1 January 2028.

These submission years align with the respective financial periods commencing on or after 1 January of each phase. Ensure that companies meeting the criteria for audit exemptions prepare their submissions accordingly.

2. Special Considerations for Dormant Companies
Dormant companies remain exempt from audit requirements if they:

  • Have not conducted business since incorporation, or

  • Remained dormant during the current and past financial year.

3. Non-Applicable Scenarios
Audit exemptions are not available for:

  • Exempt private companies with specific declarations,

  • Public companies or subsidiaries of public companies,

  • Foreign companies.

4. New Submission Requirements for Unaudited Financial Statements
Companies opting for audit exemptions must lodge unaudited financial statements with the Registrar. These must include:

  • A directors’ report,

  • A statement by directors,

  • A statutory declaration,

  • A certificate confirming eligibility for audit exemption.

5. Transitional Arrangements
Companies currently relying on Practice Directive 3/2017 can continue doing so for financial periods ending on or before December 31, 2024. Practice Directive 3/2017 will be fully replaced by Practice Directive 10/2024 starting January 1, 2025.

What Should You Do Next?
SMI companies should review their financial records and employee headcounts to determine eligibility for audit exemption under the new criteria. Preparing early will help ensure compliance and avoid unnecessary audits.

For detailed guidance or assistance in adapting to these changes, contact KTP at www.ktp.com.my. Let us help simplify your compliance journey.

AuditKtp Ktpaudit ex, SSM, Practice Directive 10/2024