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.
Audit exemption is a power the Companies Act 2016 gives the Registrar of Companies (SSM). Section 267(2) says the Registrar can exempt private companies from the duty to appoint an auditor, on conditions the Registrar decides.
Where the conditions sit. SSM Practice Directive 10/2024 (issued 16 December 2024) sets them. It replaced Practice Directive 3/2017, which had three separate categories: dormant companies, zero-revenue companies and threshold-qualified companies. The new directive keeps the dormant category and replaces the other two with a "two out of three" size test on revenue, total assets and employees, with limits that rise in phases from 2025 to 2027.
What SSM says the aim is. SSM describes the policy as reducing the audit and financial burden on micro and small companies, so more SMEs can benefit.
What it is not.
- It is not an application. SSM's FAQ confirms you do not apply or file a form to claim it.
- It is not a waiver of accounts. The company still prepares financial statements under approved accounting standards and lodges them.
- It is not permanent. Eligibility is tested again each year.
Who it covers. Private companies only. Public companies, subsidiaries of public companies and foreign companies are excluded.
Legal basis
- Companies Act 2016, s.267(2)
- SSM Practice Directive 10/2024, paras 4-5
Sources
Applies to Financial periods commencing on or after 1 January 2025 (thresholds phased 2025-2027) · 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
- 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 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.
- How do I check if my Sdn Bhd qualifies for audit exemption?Pass at least two of three tests (revenue, total assets, employees) for the current financial year and the past two, using the limits for the phase your period falls in. Also confirm you are not an excluded company type, such as a subsidiary of a public company.
- Is a dormant company exempt from audit in Malaysia?Yes, if it has been dormant since incorporation or was dormant in both the current and immediately preceding financial year. A company is dormant when it carries on no business and has no accounting transaction, ignoring payments it must legally make.
- Do I need to apply to SSM for audit exemption, and who decides?No application or form is needed. A company that meets the criteria simply elects not to appoint an auditor. In practice the directors make and certify that choice, since a director signs the certificate lodged with the accounts, but members can still force an audit.