Not every private company in Malaysia is required to have its financial statements audited.
The Companies Commission of Malaysia (SSM) introduced revised audit exemption criteria under Practice Directive 10/2024, with the new thresholds being implemented progressively over three phases.
For smaller private companies, this may reduce annual compliance costs. However, being eligible for audit exemption does not necessarily mean that a company should automatically choose not to have an audit.
What are the audit exemption thresholds?
Under the revised framework, the thresholds increase progressively from 2025 to 2027.
For financial periods commencing on or after 1 January 2026 until 31 December 2026, the Phase 2 thresholds are:
- annual revenue not exceeding RM2 million;
- total assets not exceeding RM2 million; and
- not more than 20 employees.
A qualifying private company generally needs to satisfy at least two out of the three applicable criteria, subject to the detailed conditions under SSM's Practice Directive.
The thresholds will increase again under Phase 3 for financial periods commencing on or after 1 January 2027.
Does audit exemption mean no financial statements?
No.
This is an important distinction.
Audit exemption means an eligible company may be exempted from having its financial statements audited. It does not mean that the company no longer needs proper accounts or financial statements.
Companies must still maintain proper accounting records and comply with the applicable financial reporting, tax and statutory requirements.
Should an eligible company automatically stop its audit?
Not necessarily.
There are situations where an audit may still be useful or required for other purposes.
For example, audited financial statements may be requested by:
- banks and financial institutions;
- shareholders or investors;
- suppliers or major customers;
- government agencies;
- licensing authorities; or
- a company's holding company or group.
An audit also provides an independent examination of the company's financial statements and may help strengthen confidence in the financial information presented to external parties.
Consider the bigger picture
The decision should therefore not be based solely on whether the company meets the exemption threshold.
Directors should consider how the financial statements are used, whether financing is required, whether there are multiple shareholders and whether other parties rely on the company's financial information.
For a small owner-managed business with straightforward operations, audit exemption may reduce compliance costs.
For another business of a similar size seeking bank financing or outside investment, audited financial statements may continue to be valuable.
Review your eligibility every year
Businesses should also remember that circumstances change.
Revenue may increase, assets may grow and additional employees may be hired. A company that qualifies for audit exemption in one financial year may not necessarily qualify in another.
It is therefore important to review the company's eligibility for each financial period.
Not sure whether your company qualifies for audit exemption?
CSH & Co can assist in assessing your company's circumstances and explaining the applicable audit and financial reporting requirements.
This article is intended for general information only. Audit exemption eligibility is subject to the detailed requirements and conditions prescribed by the Companies Commission of Malaysia.
For 2026 financial periods, SSM's Phase 2 thresholds are RM2 million turnover, RM2 million assets and 20 employees, with qualifying private companies generally required to meet at least two criteria. The thresholds move to RM3 million/RM3 million/30 employees in Phase 3 from financial periods commencing in 2027.
### How I'd display them on your website
For your homepage, don't show the entire articles. Under Insights & Updates, I would show three cards:
e-Invoice: RM3 Million Exemption Threshold
What the latest e-Invoice changes mean for Malaysian businesses.
MITRS: What Malaysian Companies Need to Know
A practical overview of the new tax document submission requirements.
Audit Exemption in Malaysia
Understand the 2026 thresholds and whether your company may qualify.
Then a “Read More →” button opens the full article.
That will make the CSH & Co website feel much more like an established professional firm rather than simply having pages for About Us / Services / Contact Us.