Audit Exemption

? Quick Answer: Do I qualify for audit exemption in 2026?

Your company qualifies if it meets ANY TWO of three criteria under Section 267(2) of the Companies Act 2016 — not just for the current year, but across the current and immediate past two financial years, each assessed against its own corresponding phase threshold.

Phase 1

FY 2025 → Lodge 2026

Revenue≤ RM 1,000,000
Assets≤ RM 1,000,000
Employees≤ 10

Phase 2 ← You are here

FY 2026 → Lodge 2027

Revenue≤ RM 2,000,000
Assets≤ RM 2,000,000
Employees≤ 20

Phase 3

FY 2027+ → Lodge 2028+

Revenue≤ RM 3,000,000
Assets≤ RM 3,000,000
Employees≤ 30

⚠️ Critical rule: Each year in the three-year window is assessed against the threshold for its own corresponding phase — not the current phase. For a FY 2026 (Phase 2) assessment: FY 2026 uses Phase 2 thresholds (RM 2M), FY 2025 uses Phase 1 thresholds (RM 1M). A company with RM 1.5M revenue in FY 2025 fails the FY 2025 test even if it passes Phase 2. Source: SSM PD 10/2024, paragraph 9.

What changed? PD 3/2017 vs PD 10/2024

Under the old Practice Directive 3/2017, audit exemption thresholds were so restrictive that only 7% of eligible companies ever filed unaudited accounts despite being allowed to. The new PD 10/2024, effective for financial years commencing on or after 1 January 2025, dramatically raises those thresholds and changes the eligibility rule from "all three" criteria to "any two of three." PD 3/2017 continues to apply to any financial period commencing on or before 31 December 2024.

Replaced · PD 3/2017

Previous framework

○Revenue ≤ RM 100,000
○Assets ≤ RM 300,000
○Employees ≤ 5
○Must meet ALL THREE criteria

Result: Only 7% of eligible companies ever submitted unaudited financial statements. 65,146 unaudited statements lodged since 2017 — far below potential.

Current · PD 10/2024

New framework

●Revenue up to RM 3,000,000 (Phase 3)
●Assets up to RM 3,000,000 (Phase 3)
●Employees up to 30 (Phase 3)
●Must meet ANY TWO of three criteria

Result: An estimated 51% of 691,960 active companies will qualify by Phase 3 — the most significant expansion of audit relief in Malaysia's corporate history.

Official definitions Revenue, Assets, Employees

These are not common-sense definitions — they are the precise legal definitions from PD 10/2024 paragraph 6. Using the wrong figures will invalidate your eligibility claim and expose directors to personal liability. Source: SSM PD 10/2024.

Annual Revenue

PD 10/2024 para 6(a)

Includes: Revenue received and receivable during the year.

Excludes: Credit entries for reversal of accounting entries from earlier entries · Accounting entries related to taxation · Reversal of provisions made earlier · Gain on derecognition of property, plant, equipment and investment property in the Statement of Comprehensive Income.

Total Assets

PD 10/2024 para 6(b)

Includes: All assets as defined in the applicable approved accounting standards — both current and non-current assets as shown on the Statement of Financial Position.

Use the balance sheet figure as at the end of each relevant financial year. Do not use average assets.

Employees

PD 10/2024 para 6(c) + SSM FAQ

Counted at: End of each relevant financial year (not average).

Full-time means: Paid workers working ≥ 6 hours/day for ≥ 20 days/month, or ≥ 120 hours/month. Includes local, foreign, contract, and probationary workers.

Excludes: A director who is also a full-time employee · A shareholder who is also a full-time employee · Family members or friends who are unpaid or receiving irregular wages.

The corresponding phase rule explained clearly

This is the most commonly misunderstood rule. PD 10/2024 paragraph 9 states: "The annual revenue, total assets and number of employees for the immediate past two financial years must not exceed the maximum threshold specified for the respective corresponding phase." This means each year in the window uses the threshold for its OWN phase — not the current phase.

How the three-year window works for a FY 2026 (Phase 2) assessment

Year −2

FY 2024

Pre-PD 10/2024

PD 3/2017 applied
Para 21 of PD 10/2024
governs transition

Consult your accountant for transition year treatment

+

Year −1

FY 2025

Phase 1 thresholds

Revenue ≤ RM 1,000,000
Assets ≤ RM 1,000,000
Employees ≤ 10

Must pass any 2 of 3 at Phase 1 limits

+

Current Year

FY 2026

Phase 2 thresholds

Revenue ≤ RM 2,000,000
Assets ≤ RM 2,000,000
Employees ≤ 20

Must pass any 2 of 3 at Phase 2 limits

=

Result

EXEMPT ✓

Lodge unaudited accounts via MBRS 2.0 from 1 January 2027

⚠️ Practical impact of this rule: A company with RM 1.5M revenue in FY 2025 fails the Phase 1 threshold (RM 1M) for that year — meaning it cannot claim Phase 2 exemption for FY 2026 even though RM 1.5M is within Phase 2 limits. Each prior year must pass its own phase's threshold.

💡 Transition year (FY 2024): PD 10/2024 paragraph 21 states companies must assess "the current and immediate past periods" from when the exemption takes effect. For companies first applying in Phase 1 (FY 2025), the treatment of FY 2024 data should be confirmed with a professional adviser as no corresponding phase exists for that year under PD 10/2024.

Step-by-step eligibility guide

Follow these five steps every financial year before deciding whether to claim audit exemption. Document each step — if SSM or a bank ever queries your decision, your working papers are your protection.

1

Confirm your company type is eligible

Check that your company is a private company (Sdn Bhd) incorporated in Malaysia. Verify it is not a public company, not a subsidiary of a public company, has not lodged a Section 260 certificate, and is not a foreign company registered in Malaysia. Source: PD 10/2024 paragraph 12.

2

Gather the correct figures for each of the three financial years

Use the official definitions in paragraph 6 of PD 10/2024. Revenue must exclude PPE derecognition gains and tax entries. Employee count is at year-end, full-time only (≥6 hrs/day for ≥20 days/month or ≥120 hrs/month), excluding director-employees and shareholder-employees. Assets are from the Statement of Financial Position at year-end.

Financial Year Corresponding Phase Revenue Threshold Asset Threshold Employee Threshold Criteria Met (any 2 of 3?)
FY 2024 See para 21 – – – Seek advice
FY 2025 Phase 1 ≤ RM 1,000,000 ≤ RM 1,000,000 ≤ 10 _ / 3
FY 2026 (current) Phase 2 ≤ RM 2,000,000 ≤ RM 2,000,000 ≤ 20 _ / 3
3

Apply the "any two of three" test to each year separately

Each financial year must independently pass at least two of the three criteria against that year's corresponding phase threshold. All three years must pass. If any single year fails (less than two criteria met), the company cannot claim exemption for the current financial year. Keep your working papers on file.

4

Check for shareholder notices, banking covenants, and regulatory obligations

Even if eligible, audit is required if a written notice was received before one month of financial year-end from shareholders holding ≥5% of issued shares or ≥5% of voting members, or from the Registrar. Also check existing bank facility letters, grant agreements, and any industry regulator requirements (BNM, SC, etc.) which may require audited accounts independently of SSM. Source: PD 10/2024 paragraph 14.

5

Decide: elect exemption or audit voluntarily?

Qualifying for exemption does not obligate you to use it. If you are raising investment, applying for financing, tendering for contracts, or managing multiple shareholders, voluntary audit may serve you better commercially even when the law does not require it. See the voluntary audit section below before deciding.

Worked examples four real scenarios for 2026

All figures are illustrative. Each example applies the correct corresponding phase threshold rule from PD 10/2024 paragraph 9.

A

Clear exemption — passes all 3 years

FY 2025 (Phase 1 limits)Rev RM 0.8M ✓ · Assets RM 0.9M ✓ · Staff 8 ✓
FY 2026 (Phase 2 limits)Rev RM 1.5M ✓ · Assets RM 1.8M ✓ · Staff 22 ✗

✓ Eligible for Phase 2 exemption

Passes 2 of 3 in both years. Lodge unaudited accounts + Appendix 1 certificate via MBRS 2.0.

B

Still eligible despite revenue spike

FY 2025 (Phase 1 limit RM 1M)Rev RM 1.5M ✗ · Assets RM 0.9M ✓ · Staff 9 ✓
FY 2026 (Phase 2 limits)Rev RM 1.5M ✓ · Assets RM 1.8M ✓ · Staff 18 ✓

✓ Eligible for Phase 2 exemption

FY 2025 passes assets + employees (2 of 3) even though revenue exceeded Phase 1 limit. Audit exemption only fails if fewer than 2 criteria are met in any single year.

C

Genuinely not eligible — only 1 of 3 passes

FY 2025 (Phase 1 limits)Rev RM 1.2M ✗ · Assets RM 1.4M ✗ · Staff 9 ✓
FY 2026 (Phase 2 limits)Rev RM 1.8M ✓ · Assets RM 1.9M ✓ · Staff 18 ✓

✗ Not eligible for FY 2026 exemption

FY 2025 passes only 1 of 3 (employees only). Revenue and assets both exceeded Phase 1 limits. Appoint an auditor. Reassess annually — may qualify for Phase 3 once FY 2027 becomes the current year.

D

New company (less than 3 years old)

Incorporated Jan 2025 — only FY 2025 availableRev RM 0.7M ✓ · Assets RM 0.8M ✓ · Staff 7 ✓

✓ Likely eligible — apply test over available years

PD 10/2024 paragraph 21: companies assess from when exemption takes effect. Verify with your accountant as the transition year treatment should be confirmed against the latest SSM FAQ. Source: SSM FAQ.

Companies NOT eligible — PD 10/2024 paragraph 12

These four categories are permanently excluded from audit exemption regardless of size, revenue, or number of employees. No threshold test applies — if your company falls into any of these categories, a statutory auditor must be appointed every financial year.

✕

Public companies

Including all listed companies on Bursa Malaysia and any public company (Bhd) whether listed or not — regardless of size. PD 10/2024 para 12(b).

✕

Subsidiaries of public companies

Even if the subsidiary is incorporated as a private Sdn Bhd and is below all thresholds. The public company parent relationship disqualifies it entirely. PD 10/2024 para 12(c).

✕

Foreign companies

Companies incorporated outside Malaysia and registered to operate in Malaysia under the Companies Act 2016. Note: a locally incorporated Sdn Bhd with 100% foreign ownership is NOT a "foreign company" under this definition. PD 10/2024 para 12(d).

✕

Section 260 exempt private companies

Companies that have already elected to lodge a certificate under Section 260 of the Companies Act 2016 relating to their status as an exempt private company. These use a separate mechanism and cannot also claim PD 10/2024 exemption. PD 10/2024 para 12(a).

⚠

Also excluded in practice (not in PD but in reality)

Companies regulated by BNM, SC or other licensing bodies · Companies with bank covenants requiring audited accounts (34% of active companies per SSM data) · Government grant recipients where grant agreement requires audited statements · Companies tendering for government or GLC contracts.

When an audit can still be required even if you qualify

Qualifying for audit exemption does not guarantee you can use it. Under PD 10/2024 paragraph 14, audit is required if a written notice is received during the financial year but not later than one month before the end of that financial year from any of the following three sources:

14a

Shareholder notice (by shares)

Any member or members eligible to vote, holding in aggregate not less than 5% of the total number of issued shares of the company or any class of those shares.

14b

Shareholder notice (by number)

Not less than 5% of the total number of members eligible to vote in the company — regardless of how many shares they hold.

14c

Registrar direction

The Registrar of Companies (SSM) who directs the company to have its accounts audited — this can happen at any time and cannot be refused by the company.

⏰ Deadline rule: The notice must be received by the company during the financial year but no later than one month before the financial year end. A notice received after this deadline does not require the company to audit that financial year. Source: PD 10/2024 paragraph 14.

What you must still file with SSM if you elect exemption

Audit exemption removes the obligation to appoint a statutory auditor. It does not remove the obligation to prepare and lodge financial statements with SSM. Under PD 10/2024 paragraphs 15–18, these four documents are mandatory.

01

Unaudited financial statements

Must be prepared under MPERS (Malaysian Private Entities Reporting Standard) as issued by MASB, or MFRS if the company has elected to apply it. Must include balance sheet, income statement, cash flow, and notes. Section 244(1), Companies Act 2016.

02

Directors' report, statement and statutory declaration

Directors' report (Section 251), statement by directors, and statutory declaration are all required to be lodged with SSM under Sections 251 and 252 of the Companies Act 2016. Two directors must sign confirming a true and fair view.

03

Audit Exemption Certificate (Appendix 1)

The prescribed certificate from Appendix 1 of PD 10/2024, signed by a director certifying eligibility for exemption under Section 267(2) of the Companies Act 2016. Exact prescribed wording must be used — see Section 11 below.

04

Digital lodgment via MBRS 2.0 in XBRL

All documents must be submitted through SSM's MBRS 2.0 portal in XBRL format within the prescribed deadlines under Sections 258 and 259 of the Companies Act 2016. Late lodgment carries significant financial penalties. See the MBRS walkthrough below.

MBRS 2.0 filing walkthrough for exempt companies

All exempt company financial statements must be lodged through SSM's MBRS (Malaysian Business Reporting System) 2.0 portal in XBRL format. This is not optional — even unaudited accounts require digital lodgment. Full guide: MBRS Preparers' Guide (PDF).

1

Log in via SSM e-portal

Access efiling.ssm.com.my using your company's authorised credentials. The preparer (accountant or company secretary) must be authorised under the correct digital identity. Ensure Corppass or equivalent access is set up before attempting to file.

2

Select the correct form type for audit-exempt companies

In the MBRS 2.0 dashboard, select "Unaudited Financial Statements (Audit Exempt)" — not the standard audited accounts form. The XBRL taxonomy fields differ between audited and unaudited submissions. Selecting the wrong form type is one of the most common causes of rejected filings.

3

Prepare XBRL-tagged financial statements under MPERS

Financial statements must be tagged to the SSM-approved XBRL taxonomy using MPERS (or MFRS if elected) as the applicable approved accounting standard under Section 244(1) of the Companies Act 2016. Use MBRS-compatible accounting software or the templates in the MBRS Preparers' Guide. Note: the updated MPERS (2025 edition) takes effect from 1 January 2027.

4

Attach the signed Audit Exemption Certificate (Appendix 1)

Upload the signed Appendix 1 certificate as a supporting document. The prescribed wording must appear exactly as in PD 10/2024 Appendix 1 — no paraphrasing. The certificate must be signed by a director certifying eligibility under Section 267(2) of the Companies Act 2016. If the director is not primarily responsible for financial management, the name of the responsible person must also be stated per PD 10/2024 paragraph 19.

5

Submit and retain the SSM acknowledgment receipt

After successful submission, MBRS 2.0 generates a filing reference number and acknowledgment receipt. Save this permanently. It is your legal proof of compliance under Sections 258 and 259 of the Companies Act 2016. Deadline: lodge within 30 days of the date the financial statements are circulated to members, which itself must be within 30 days of the financial year end.

Audit Exemption Certificate Appendix 1 · PD 10/2024

This is the exact prescribed wording from Appendix 1 of PD 10/2024, read directly from the official SSM document. Every word must appear as written. Replace bracketed placeholders with your company's actual details. The accounting standard stated must be MPERS — or MFRS if your company has elected to apply MFRS.

📄 AUDIT EXEMPTION CERTIFICATE — APPENDIX 1, PD 10/2024

(i) Members have not requested the company to perform an audit of its accounts for that year.

(ii) The directors acknowledge their responsibilities for complying with the requirements of the Companies Act 2016 with respect to accounting records and the preparation of Financial Statements.

(iii) These Financial Statements have been prepared in accordance with applicable approved accounting standards issued by Malaysian Accounting Standards Board (MASB), namely the Malaysian Private Entities Reporting Standard (MPERS)1 and complies with the requirements of the Companies Act 2016.

The unaudited Financial Statements and reports made up to [31 XXXX 20XX] required under the Companies Act 2016 have been circulated to the members on [30 XXXX 20XX].

Signed by: ________________________

Name: ________________________

NRIC No.: ________________________

Designation: Director

Date: ________________________

1 If the company has elected to apply MFRS, replace "MPERS" with "Malaysian Financial Reporting Standards (MFRS)".

Source: SSM Practice Directive 10/2024, Appendix 1. Always download the latest version directly from SSM before use.

Directors' responsibilities do not disappear with exemption

SSM's own announcement is explicit: "Audit exemption does not mean governance exemption." Directors and companies remain fully responsible under the Companies Act 2016 regardless of audit status. These obligations are confirmed in the SSM announcement document.

📚

Maintain proper accounting records

Accounting records must be kept in accordance with Section 245 of the Companies Act 2016 for at least seven years.

⚖️

True and fair view

Financial statements must give a true and fair view of the company's financial position and performance under Section 244 of the Companies Act 2016.

✍️

Board approval and signing

Financial statements must be approved by the board of directors under Section 248 and signed by at least two directors before lodgment.

📅

Lodge within statutory deadlines

Accounts must be lodged with SSM within prescribed timeframes under Sections 258–259. Late lodgment carries penalties regardless of audit status.

📣

Communicate decision to shareholders

SSM states that communicating the decision to opt for audit exemption to shareholders is crucial for good corporate governance and fostering trust and accountability.

🔄

Reassess eligibility annually

Exemption is not permanent. If thresholds are exceeded in any year, the company must revert to statutory audit immediately. Per PD 10/2024 paragraph 13.

Should you still audit voluntarily? decision guide

34% of active companies in Malaysia have unsatisfied charges registered with SSM — meaning their banks may already require audited accounts regardless of the exemption. Use this decision guide before electing exemption.

Your situation Use exemption? Reason
Small lifestyle or family business, no external investors or debt ✓ No external stakeholders requiring audited accounts
Applying for bank loans, overdrafts or credit facilities ⚠️ Most banks require audited accounts — check your facility letter first. 34% of companies have unsatisfied charges (SSM data)
Onboarding new investors or raising external capital ⚠️ Investors typically require audited accounts for due diligence and share valuation
Applying for government grants (MDEC, MIDA, SME Corp, etc.) ✗ Most government grant programmes explicitly require audited financial statements
Tendering for government or GLC contracts ✗ Tender requirements almost always specify audited accounts for the past 2–3 years
Dormant company with no business activities ✓ Dormant companies are automatically exempt under PD 10/2024 paragraph 10 — separate from the threshold test

Common mistakes and how to avoid them

These are the six most frequent errors we see when companies claim Malaysia audit exemption. Each can result in a rejected MBRS submission, a compliance breach, or personal director liability.

Mistake 1

Applying the current phase threshold to all three years

PD 10/2024 paragraph 9 states each prior year uses its respective corresponding phase threshold — not the current phase. FY 2025 must pass Phase 1 limits (RM 1M), not Phase 2 limits (RM 2M).

✓ Fix: Build the eligibility table with correct phase thresholds for each year as shown in Step 2 above.

Mistake 2

Including wrong items in the revenue figure

Revenue for threshold purposes excludes gains on PPE derecognition, tax-related entries, and reversal of provisions. Including these can incorrectly push a company over the threshold or under-report actual trading revenue.

✓ Fix: Use PD 10/2024 paragraph 6(a) definition exactly. Have your accountant prepare an adjusted revenue calculation if the company sold any fixed assets in the year.

Mistake 3

Counting directors and shareholders as employees

PD 10/2024 paragraph 6(c) explicitly excludes director-employees and shareholder-employees from the headcount. Many small Sdn Bhd companies include working directors in their staff count — this will overstate the employee threshold and may wrongly disqualify the company.

✓ Fix: Count only paid full-time employees working ≥6 hrs/day for ≥20 days/month (or ≥120 hrs/month) who are not directors or shareholders.

Mistake 4

Using wrong or paraphrased wording in the Appendix 1 certificate

The Audit Exemption Certificate must use the exact prescribed wording from Appendix 1 of PD 10/2024. Paraphrasing, abbreviating, or translating the text is one of the most common causes of MBRS submission rejection.

✓ Fix: Copy the certificate wording exactly from the template in Section 11 above. Download the PD 10/2024 PDF from SSM directly to verify.

Mistake 5

Assuming "exempt = no filing required"

Audit exemption only removes the requirement to appoint an auditor. The obligation to prepare and lodge financial statements (unaudited) with SSM remains fully in force under PD 10/2024 paragraph 15 and Sections 258–259 of the Companies Act 2016. Missing the lodgment deadline triggers late filing penalties.

✓ Fix: Set a filing deadline reminder. Lodge unaudited accounts + Appendix 1 certificate via MBRS 2.0 within 30 days of circulating accounts to members.

Mistake 6

Not checking bank covenants or grant conditions

SSM's own data shows 34% of active companies have unsatisfied charges that may require audited accounts. Switching to unaudited accounts while a bank covenant or grant condition requires audited statements can constitute a breach of contract regardless of what SSM's PD 10/2024 allows.

✓ Fix: Before electing exemption, review all loan facility letters, grant agreements, and licences. Obtain written confirmation from your bank if in doubt. When in doubt, audit voluntarily.

Frequently asked questions (12 questions)

All answers are based on SSM Practice Directive 10/2024 and official SSM documents. Where interpretation is required, we note it clearly.

What is Malaysia audit exemption and which law governs it? +

Malaysia audit exemption is a legal provision under Section 267(2) of the Companies Act 2016, which gives the Registrar of Companies (SSM) the power to exempt eligible private companies from the statutory audit requirement under Section 267(1). The current governing document is SSM Practice Directive No. 10/2024 (PD 10/2024), issued on 16 December 2024 and effective for financial years commencing on or after 1 January 2025. It replaced Practice Directive 3/2017, which remains applicable to all financial periods commencing on or before 31 December 2024. Source: SSM PD 10/2024.

Can my company opt out of audit in 2026? +

Yes, if your company meets any two of the Phase 2 thresholds — revenue ≤ RM 2,000,000, total assets ≤ RM 2,000,000, and employees ≤ 20 — for FY 2026 (Phase 2 limits), AND your FY 2025 figures passed any two of the Phase 1 thresholds (revenue ≤ RM 1,000,000, assets ≤ RM 1,000,000, employees ≤ 10). Each year in the three-year window must pass its own corresponding phase threshold. This applies to financial years commencing on or after 1 January 2026. Source: PD 10/2024 paragraphs 5 and 9.

Do I need to apply to SSM for audit exemption? +

No. There is no separate application form or prior SSM approval required. The exemption is self-assessed by the directors. Your obligations are to: (1) confirm eligibility using the three-year corresponding phase test, (2) ensure no exclusion under PD 10/2024 paragraph 12 applies, (3) prepare unaudited financial statements under MPERS or MFRS, (4) include the signed Appendix 1 certificate, and (5) lodge everything through MBRS 2.0 within the statutory deadline. Source: SSM Audit Exemption FAQ.

What if my company exceeds the threshold in one year? +

If in any year within the three-year window your company passes fewer than two of the three criteria against that year's corresponding phase threshold, the company ceases to qualify for audit exemption for the current financial year and must appoint a statutory auditor. Per PD 10/2024 paragraph 13, the company remains exempted for the financial years in which it previously qualified — exemption is not forfeited retroactively. Reassess annually using updated accounts figures.

Can shareholders still demand an audit even if the company qualifies? +

Yes. Under PD 10/2024 paragraph 14, an audit is required if a written notice is received before one month of the financial year end from: (a) members eligible to vote holding in aggregate not less than 5% of the total number of issued shares or any class of those shares; (b) not less than 5% of the total number of members eligible to vote; or (c) the Registrar who directs the company to have its accounts audited. The notice must arrive before one month of the financial year end — notices arriving after this deadline do not require audit for that year.

Do dormant companies need to audit? +

No. Under PD 10/2024 paragraph 10, companies that have been dormant since incorporation, or dormant during the current and immediately preceding financial year, are automatically exempt from the audit requirement. A company is dormant if it carries on no business and has no accounting transactions (excluding statutory obligations like annual fees). Dormant companies still need to lodge a dormant company statement with SSM. This exemption is separate from — and in addition to — the threshold-based exemption.

Does Phase 2 apply if my financial year started before 1 January 2026? +

No. Phase 2 thresholds apply only to financial years commencing on or after 1 January 2026. If your financial year started on 1 July 2025, that year falls under Phase 1 (thresholds: RM 1,000,000 / RM 1,000,000 / 10 employees). Your next financial year commencing 1 July 2026 will be assessed under Phase 2. Phase 3 applies to financial years commencing on or after 1 January 2027. Source: PD 10/2024 paragraph 9.

Which accounting standard must be used for exempt company accounts? +

Unaudited financial statements must be prepared under MPERS (Malaysian Private Entities Reporting Standard) as issued by MASB, or MFRS (Malaysian Financial Reporting Standards) if the company has elected to apply MFRS. This must be stated explicitly in the Appendix 1 certificate. The footnote in PD 10/2024 Appendix 1 confirms that MFRS is an alternative if elected. The updated MPERS (2025 edition) takes effect from 1 January 2027. Source: MASB MPERS page, PD 10/2024 Appendix 1.

Is a foreign-owned Sdn Bhd eligible for audit exemption? +

A locally incorporated Sdn Bhd with foreign shareholders is not automatically disqualified. The exclusion in PD 10/2024 paragraph 12(d) applies specifically to "foreign companies" — defined as companies incorporated outside Malaysia and registered to operate in Malaysia under the Companies Act 2016. A Sdn Bhd incorporated in Malaysia with 100% foreign ownership is a Malaysian company and may be eligible if it meets all other criteria. Always verify this against the latest SSM FAQ for your specific structure. Source: SSM Audit Exemption FAQ.

What happens if a company wrongly claims audit exemption? +

Incorrectly claiming audit exemption constitutes a breach of the Companies Act 2016. SSM has the authority to require a retrospective audit, issue corrective directions, and impose penalties on the company and its directors. A director who signs a false Appendix 1 certificate may face personal liability under the Companies Act 2016. Always document your three-year eligibility working papers and retain them for at least seven years. If in doubt about eligibility, appoint an auditor and seek professional advice.

How much can a company save by using audit exemption? +

Statutory audit fees for a small Sdn Bhd in Malaysia typically range from RM 2,000 to RM 8,000 per year depending on the complexity of the business, industry, and audit firm engaged. Companies electing exemption eliminate this cost entirely. However, they still require professionally prepared unaudited financial statements under MPERS, typically costing between RM 800 and RM 2,500. The net saving varies, but most small businesses save between RM 1,500 and RM 5,500 per year. The SSM reform was explicitly designed to reduce the cost of doing business for Malaysia's 691,960 active private companies.

When does Phase 3 start and what changes? +

Phase 3 applies to financial years commencing on or after 1 January 2027, with lodgment submissions beginning from 1 January 2028. The thresholds increase to revenue ≤ RM 3,000,000, total assets ≤ RM 3,000,000, and employees ≤ 30 (any two of three criteria). Phase 3 also coincides with the effective date of the updated MPERS (2025 edition) issued by MASB, which becomes the applicable accounting standard for exempt companies preparing accounts from that date. SSM estimates 51% of Malaysia's 691,960 active companies will be eligible by Phase 3. Source: PD 10/2024 paragraph 9, MASB.

How JT & CY Advisory helps

We handle the complete audit exemption process from eligibility assessment through to MBRS 2.0 lodgment — so your directors can focus on the business, not on navigating SSM compliance.

→ Three-year eligibility assessment using correct corresponding phase thresholds (PD 10/2024)
→ Unaudited financial statements prepared under MPERS, compliant with Section 244(1) of the Companies Act 2016
→ Audit Exemption Certificate (Appendix 1) preparation with exact PD 10/2024 prescribed wording
→ Directors' report, statutory declaration and all required supporting documents under Sections 251–252
→ Full XBRL lodgment via MBRS 2.0 portal within statutory deadlines (Sections 258–259)
→ Annual threshold monitoring and Phase 3 readiness planning for companies approaching RM 3,000,000
Sim Chong Yen, FCCA MIA — JT & CY Advisory

Sim Chong Yen
FCCA · MIA · JT & CY Advisory

Important Notice: The information on this page is for general informational purposes only and does not constitute legal, financial, or professional advice. While JT & CY Advisory endeavours to keep all content accurate and current with official SSM, MASB, and Companies Act 2016 requirements, Malaysian regulations may be updated without prior notice. All content on this page has been prepared with reference to SSM Practice Directive No. 10/2024, SSM official documents, and the Companies Act 2016 as at March 2026. For the most authoritative information, always refer directly to the official SSM website at www.ssm.com.my and consult a qualified Malaysian accountant or company secretary before making any compliance decision. Any reliance on this page is strictly at your own risk. JT & CY Advisory shall not be held liable for any loss, damage, or inconvenience arising from the use of this content.

Last updated: March 2026 · Sources verified against SSM PD 10/2024 (16 December 2024), SSM Audit Exemption FAQ, and Companies Act 2016 · JT & CY Advisory is an affiliate of Terra Advisory Services (ACRA FA20122913)