SSM has introduced a major update to audit exemption criteria in Malaysia — and this change is expected to benefit many SME’s.

Through Practice Directive No. 10/2024, the new criteria will apply to financial periods beginning on or after 1 January 2025.

For many private companies, this could mean lower compliance costs and reduced administrative burden.

What Is Audit Exemption?

Audit exemption allows eligible private companies to operate without undergoing statutory audit.

However, many business owners misunderstand this concept.

Audit exemption does NOT mean:
❌ No financial statements
❌ No accounting records
❌ No compliance obligations

Companies are still required to:
✅ Prepare proper financial statements
✅ Maintain accounting records
✅ Comply with SSM requirements
✅ Follow applicable reporting standards

The only exemption is from mandatory statutory audit.

What Changed?

Previously, audit exemption was only available to very small companies.

The old thresholds generally required:
• Revenue ≤ RM100,000
• Assets ≤ RM300,000
• ≤ 5 employees

Under the revised framework, SSM has significantly increased the qualifying thresholds.

New Audit Exemption Criteria

A private company may qualify if it fulfills ANY 2 out of the following 3 conditions:
• Revenue within threshold
• Total assets within threshold
• Number of employees within threshold

New Thresholds by Phase

Newly Incorporated Companies Phase

Newly incorporated companies will generally not qualify immediately.

This is because eligibility is based on:
• Current financial year, AND
• Immediate past two financial years

As a result, companies typically need a financial history before they can qualify for audit exemption.

Important Detail Most Companies Miss

Companies generally need to satisfy the criteria for:
• Current financial year; and
• Immediate past two financial years.

This means qualification is not based on a single year alone.

Who Cannot Apply?

Audit exemption does not apply to:
• Public companies
• Listed companies
• Subsidiaries of public companies
• Foreign companies
• Certain exempt private companies

Why This Update Matters

The revised criteria are expected to help SMEs reduce audit fees, compliance costs and administrative burden.

This is especially beneficial for:
✔️ Startups
✔️ Small service companies
✔️ Family-owned businesses
✔️ Growing SMEs

However, companies should still consider whether audited financial statements may be necessary for:
• Bank financing
• Investor requirements
• Internal governance
• Business expansion plans

Final Thoughts

The latest SSM audit exemption update represents a significant change for Malaysian private companies.

While the exemption may help reduce compliance costs, businesses should still carefully assess their reporting obligations and operational needs before deciding whether to proceed with audit exemption.

If you would like assistance in checking your company’s eligibility or understanding the impact of the latest update, feel free to contact our team.