What are the consequences if a Sdn Bhd that must be audited does not have an audit?
Directors can face a fine up to RM500,000 or up to one year in prison under section 248, the company and directors commit an offence under section 267(7), and SSM can appoint an auditor on a member's application. Accounts also cannot be properly circulated or lodged.
If the company does not qualify for audit exemption (or never elected it), the audit is a legal requirement.
Directors' exposure
- Section 248(2): financial statements must be duly audited before being sent to members. A director who contravenes section 248 commits an offence, fine up to RM500,000, imprisonment up to one year, or both (section 248(3)).
- Section 267(7): the company and every director commit an offence if the company does not appoint an auditor as required.
Registrar's role
- A member may apply in writing for the Registrar to appoint an auditor if a private company fails to (section 268).
- The Registrar can also direct an exempt company to audit (Practice Directive 10/2024, para 14).
Knock-on effects
- Late circulation and lodgement offences (sections 258 and 259).
- Banks, tenderers and investors that ask for audited accounts will not accept unaudited ones.
- Mis-claiming exemption can leave the directors having signed an incorrect certificate.
Fixing it
- Appoint an approved company auditor straight away.
- Ask SSM for a lodgement extension before the deadline passes.
- Take legal or professional advice about past years.
No substitute. Review reports, compilations, or management accounts do not satisfy section 248(2) and cannot replace a statutory audit where one is required.
Legal basis
- Companies Act 2016, ss.248, 267(7), 268
- SSM Practice Directive 10/2024, para 14
Sources
- Companies Act 2016, section 248 - Directors shall prepare financial statements (annotated text)
- Companies Act 2016, section 267 - Appointment of auditors of private company (annotated text)
- Companies Act 2016, section 268 - Power of Registrar to appoint auditors of private company (annotated text)
- SSM Practice Directive 10/2024: Qualifying Criteria for Audit Exemption (copy circulated by MAICSA)
Applies to 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- Can shareholders or SSM force an audit-exempt company to be audited?Yes. An otherwise eligible company must audit if it receives written notice, no later than one month before its financial year ends, from members holding at least 5% of shares, at least 5% of voting members, or from the Registrar directing an audit.
- What happens if a Sdn Bhd fails to appoint an auditor?The company and every director commit an offence under section 267(7). Any member can apply in writing for the Registrar to appoint an auditor under section 268. Failing to have the accounts audited can also expose directors under section 248.
- Does every Sdn Bhd in Malaysia need to be audited?Not every one, but audit is the default. Section 267(1) of the Companies Act 2016 requires a private company to appoint an auditor for each financial year, unless it qualifies for and elects the audit exemption set by SSM's Practice Directive 10/2024.
- What is audit exemption for private companies in Malaysia?Audit exemption lets an eligible private company choose not to appoint an auditor for a financial year. It rests on section 267(2) of the Companies Act 2016 and SSM Practice Directive 10/2024. The company still prepares and lodges unaudited financial statements.
- What are the audit exemption thresholds for a Sdn Bhd in 2026?For financial periods starting 1 January to 31 December 2026 (Phase 2), a private company must meet at least two of three tests: revenue up to RM2,000,000, total assets up to RM2,000,000, and no more than 20 employees. Each test covers the current and past two years.