Audit Exemption

Reduce compliance overhead and streamline financial reporting for your business. JT & CY Advisory guides eligible Malaysian private companies through SSM audit exemption criteria under the Companies Act 2016—helping you assess qualification thresholds, prepare compliant unaudited statements, and manage statutory filings with confidence.

? Quick Answer: What is Malaysia's audit exemption framework under SSM Practice Directive 10/2024?

Under SSM Practice Directive 10/2024, qualifying private companies in Malaysia are exempt from statutory audit requirements if they meet specific size thresholds across three criteria (revenue, assets, and employees). The exemption is rolled out in phases beginning with dormant and small companies, reaching Phase 2 thresholds for 2026.

  • ✓ Meets Two of Three Criteria – Must satisfy any two conditions (annual revenue, total assets, employee headcount) for the current and past two financial years.
  • ✓ Saves Compliance Costs – Eliminates external audit fees while maintaining full requirement for proper accounting records and unaudited financial statements.
  • ✓ Phased Implementation – Thresholds expand annually from 2025 through 2027 to cover a broader range of SMEs.
  • ✓ Lodges Exemption Certificate – Requires a formal compliance certificate lodged with the Companies Commission of Malaysia (SSM).
🇲🇾 2026 / Phase 2 Thresholds
Annual Revenue: ≤ RM2,000,000
Total Assets: ≤ RM2,000,000
Employees: ≤ 20
Directive: SSM PD 10/2024
≡ What this guide covers
01 What is audit exemption? 02 Thresholds & rollout phases 03 Core eligibility criteria 04 Obligations when exempt 05 How to assess & apply 06 How JT & CY Advisory helps 07 FAQs (12 questions) 08 Official references

1. What is audit exemption for private companies in Malaysia?

Audit exemption allows qualifying private limited companies (Sdn Bhd) to dispense with the statutory requirement to appoint an external auditor and have their financial statements audited.

Introduced via SSM Practice Directive 10/2024, this framework modernizes Malaysia’s corporate regulatory landscape by lowering compliance burdens on small and medium-sized enterprises (SMEs) that meet defined size parameters.

2. Audit exemption threshold phases (PD 10/2024)

The qualification limits scale up progressively across multiple phases:

Phase Financial Year Max Revenue Max Assets Max Employees
Phase 1 2025 ≤ RM1,000,000 ≤ RM1,000,000 ≤ 10
Phase 2 2026 ≤ RM2,000,000 ≤ RM2,000,000 ≤ 20
Phase 3 2027 & Beyond ≤ RM3,000,000 ≤ RM3,000,000 ≤ 30

3. Core eligibility rules and conditions

To qualify for audit exemption under any given phase, a private company must satisfy the following fundamental requirements:

  • • The "2 out of 3" Rule: The company must meet any two of the three threshold parameters (revenue, assets, employees) for the current financial year and the immediate past two financial years.
  • • Company Type Exclusion: Certain entities—such as public companies, regulated financial institutions, insurance companies, and capital market license holders—are strictly excluded regardless of size.
  • • Solvency Test: The company must remain solvent and capable of meeting its financial obligations as they fall due.
Important Note on Dormant Companies: Dormant companies that meet separate SSM criteria have enjoyed specific exemptions historically, but active SMEs must carefully track their figures against Practice Directive 10/2024 limits annually.

4. What audit exemption does NOT mean (Ongoing obligations)

Opting out of a statutory audit does not mean a company is free from keeping financial records. Management remains responsible for:

  • ✓ Maintaining proper, up-to-date accounting records that sufficiently explain transactions.
  • ✓ Preparing unaudited financial statements that comply with approved accounting standards (MFRS/MPERS).
  • ✓ Lodging the required audit exemption certificate and financial statements with SSM within the statutory deadlines.
  • ✓ Ensuring accurate tax filing with LHDN based on compliant financial records.

5. How to assess and execute audit exemption

Companies should follow a structured annual review process:

  • • Review revenue, total asset values, and average employee count for the current and past two financial years.
  • • Confirm that the company does not fall under any excluded regulated categories.
  • • Instruct your corporate secretary or accountant to prepare unaudited financial statements and lodge the appropriate exemption documentation with SSM.

6. How JT & CY Advisory assists with audit exemption

  • ✓ Comprehensive eligibility assessment under SSM Practice Directive 10/2024
  • ✓ Preparation of accurate, compliant unaudited financial statements
  • ✓ Lodgment of required audit exemption certificates and annual returns with SSM
  • ✓ Guidance on maintaining robust internal accounting controls and tax reporting clarity
Check Your Eligibility

Sim Chong Yen

FCCA, MIA
Lead Advisory Partner

7. Frequently Asked Questions

1. Does my company need an audit in 2026?
Your company may qualify for audit exemption in 2026 if it meets any two of the three Phase 2 criteria: annual revenue ≤ RM2,000,000, total assets ≤ RM2,000,000, and employees ≤ 20, subject to SSM Practice Directive 10/2024 conditions.
2. What are the 2026 audit exemption thresholds?
Phase 2 applies for 2026: revenue ≤ RM2,000,000, assets ≤ RM2,000,000, and employees ≤ 20 (meeting any two of these three criteria).
3. What is the difference between audit exemption and an audit?
Audit exemption means the company does not need to hire an external auditor to inspect and certify its financial statements. However, proper accounting records and unaudited financial statements must still be compiled and lodged.
4. Do all private companies qualify for audit exemption automatically?
No. Companies must meet the specific financial and headcount thresholds, maintain solvency, and not belong to excluded categories such as licensed financial institutions.
5. What happens if my company exceeds the thresholds?
If your company exceeds the size criteria for a given phase, it must revert to full statutory audit requirements and appoint an external auditor for that financial year.
6. Does audit exemption mean we do not need to prepare accounts?
Absolutely not. Management is still legally bound to maintain proper books of accounts and prepare compliant financial statements for members and tax authorities.
7. What documents must be lodged with SSM when exempt?
Companies lodge their unaudited financial statements along with the prescribed audit exemption certificate signed in accordance with SSM requirements.
8. Can shareholders request an audit even if the company is exempt?
Yes, shareholders holding a specified percentage of shares can require the company to carry out an audit notwithstanding the exemption thresholds.
9. When are the financial statements required to be lodged?
For private companies, financial statements must generally be lodged with SSM within 30 days after they have been circulated to members.
10. How does audit exemption affect tax filing with LHDN?
Tax computations must still be prepared accurately based on your unaudited financial statements and submitted to LHDN within the statutory 7-month deadline after financial year-end.
11. What are the future phases of audit exemption?
Following Phase 1 in 2025 and Phase 2 in 2026, Phase 3 takes effect in 2027 and beyond, expanding thresholds up to RM3,000,000 in revenue/assets and 30 employees.
12. How can JT & CY Advisory help us review our eligibility?
We review your historical financials, asset values, and headcount to confirm precise alignment with Practice Directive 10/2024 and manage your unaudited reporting seamlessly.