Audit Exemption 2025: What Private Companies In Malaysia Need To Know

For business owners and foreign investors seeking to establish a presence in Malaysia, a thorough understanding of the audit exemption framework is crucial for optimising costs and enhancing financial reporting efficiency. For many small and medium enterprises (SMEs) in Malaysia, annual audits can be costly and time-consuming. 

Pursuant to the Companies Act 2016, certain private companies may qualify for audit exemption. On 16 December 2024, the Companies Commission of Malaysia (CCM) issued Practice Directive No. 10/2024, introducing updated criteria effective for financial periods starting 1 January 2025.

These changes aim to ease the burden on SMEs by gradually increasing revenue, asset, and staffing thresholds over the next three years. This phased approach gives businesses time to adjust while reducing audit-related expenses. Whether you’re launching a startup or scaling a growing company, these updates offer a strategic opportunity to optimise compliance and cut costs.

This guide will cover who qualifies for audit exemption in Malaysia,benefits of audit exemption, what are the key highlights of the recent audit amendments and steps to apply for audit exemption in Malaysia 2025.

What is Audit Exemption in Malaysia?

Audit exemption means that a company’s financial statements are exempt from review by a certified auditor, provided it meets specific qualifying conditions. This enables businesses to reduce audit costs while maintaining compliance with statutory financial reporting requirements. Audit exemption was introduced to ease the compliance requirements for companies that are small in size or have minimal financial activity. Instead of going through the traditional audit process, which involves engaging an external auditor to examine and certify the financial records, eligible companies can prepare unaudited financial statements.

This doesn’t mean a company can lack in its financial reporting—records must still be accurately maintained, and unaudited accounts must be submitted where required. Audit exemption simply removes the need for a formal audit by a certified public accountant, offering more flexibility to businesses that operate at a smaller scale.

Introduced by SSM, the audit exemption applies to private limited companies (Sdn. Bhd.) that meet specific criteria.

Why New Criteria in 2025 in Malaysia?

The new framework is committed to maintaining a robust yet adaptable regulatory environment that supports business growth and upholds financial accountability.

The revised criteria, effective from 2025, are intended to:

• Reflect current business trends and economic realities.
• Provide fair relief to genuinely small or dormant companies
• Improve the quality of financial statement audits
• Reduce compliance costs for SMEs
• Ensure corporate governance practices remain efficient and transparent

Who Qualifies for Audit Exemption in Malaysia?

All private companies that rely on audit exemption must reassess their eligibility based on the updated conditions. Companies previously eligible may need to review their financial metrics, while others may newly qualify.

What is the Current vs. New Audit Exemption Criteria

Current Criteria (Until End of 2024)

Previously, Practice Directive No. 3/2017, issued by the Suruhanjaya Syarikat Malaysia (SSM), established the audit exemption qualifying criteria for specific categories of private companies. These categories include:

1. Dormant Company;
2. Zero Revenue Company;
3. Threshold Qualified Company.

New Criteria (From 2025 Onward)

A private company qualifies for audit exemption if it meets at least two out of the three conditions below, for three consecutive years:

1)Annual Revenue

The company’s annual revenue for the current financial year, as well as for the two preceding financial years, must not exceed RM3,000,000.

2)Total Assets

The total assets reported in the current statement of financial position, along with those from the two preceding financial years, must not exceed RM3,000,000

3) Number of Employees

The number of employees at the end of the current financial year, as well as for the two preceding financial years, must not exceed 30.

Implementation Timeline (2025–2027)

The implementation of the threshold criteria for audit exemption will be phased in over three years to ease the transition into the new audit framework.

This phased approach allows companies to adapt gradually to the new requirements while ensuring that the qualifying criteria remain relevant for entities of varying sizes.

The thresholds for revenue, assets, and number of employees will be incrementally as follows:

What are the Other Requirements for Audit Exemption?

• Companies dormant since incorporation or dormant in both the current and immediate past financial year still qualify.
• Audit exemption is not available to:
  • Exempt private companies that file a certificate under section 260 of the CA 2016
  • Public companies and their subsidiaries
  • Foreign companies
• If a company no longer qualifies, it must undergo an audit, but remains exempt for past years when it did qualify.

What are the Benefits of the 2025 Audit Exemption in Malaysia?

The new directive significantly reduces the compliance burden for private companies, particularly SMEs. By exempting eligible companies from mandatory audits, SSM ensures:

• Cost Savings: Lower compliance costs for small businesses
• Efficiency: Streamlined corporate governance processes
• Transparency: Clear criteria that simplify eligibility assessment
• Encouragement for Startups: Easier early-stage compliance

How to Apply for Audit Exemption in Malaysia 2025?

Step 1: Check Eligibility Criteria

• Verify if your company qualifies under dormant, zero-revenue, or small company status.

Step 2: Prepare Unaudited Financial Statements

• Even without an audit, you must still prepare and submit financial statements.

Step 3: Obtain Director and Shareholder Approval

• Directors and shareholders must agree to apply for audit exemption.

Step 4: File with SSM & LHDN

• Submit your unaudited financial statements and tax filings as per Malaysia corporate compliance regulations.

Conclusion: 

The audit exemption criteria updates beginning in 2025 represent a key regulatory shift designed to support SMEs while maintaining good financial practices. With higher thresholds and a phased approach, many private companies can now enjoy simplified compliance and reduced audit costs.
Now is the time to evaluate your eligibility and prepare for the transition. Proactive planning will help ensure you’re ready to meet the new standards without disruption.

Let 3E Accounting guide your business through the process. Reach out today for expert advice on qualifying for audit exemption under the new rules.

Frequently Asked Questions