Which companies cannot use the audit exemption?
Public companies (including listed ones), private companies that are subsidiaries of a public company, foreign companies, and exempt private companies that choose to lodge an exempt private company certificate instead of financial statements cannot use the audit exemption.
Paragraph 12 of Practice Directive 10/2024 lists four exclusions.
- Exempt private companies (EPCs) lodging a certificate. An EPC may lodge a certificate under section 260 instead of its financial statements. That certificate must be signed by a director, the auditor and the secretary and confirms audited statements were circulated, so it cannot sit alongside an audit exemption. SSM's FAQ says an EPC can use the exemption if it instead lodges unaudited financial statements and meets the criteria.
- Public companies, including listed companies.
- Private companies that are subsidiaries of a public company. SSM's FAQ confirms this applies even though the subsidiary is itself private.
- Foreign companies.
What does not exclude you
- Having corporate shareholders (SSM FAQ confirms this is fine if you meet the criteria).
- Being small or newly formed.
If you are excluded, you must appoint an auditor each year under section 267(1).
Foreign parent. The directive lists "a public company" and "a foreign company" as separate exclusions, and it does not address a private company owned by an overseas listed parent. The Companies Act 2016 defines a "public company" as a company other than a private company, and a "company" as one incorporated under that Act, so an overseas parent is ordinarily a foreign company rather than a public company. SSM has not stated how it treats this case in the directive or its FAQ, so confirm with SSM if it affects you.
Legal basis
- SSM Practice Directive 10/2024, para 12
- Companies Act 2016, s.260
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 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.
- How do the 2025 to 2027 phases for audit exemption work?Practice Directive 10/2024 raises the audit exemption limits in three steps, based on when the financial period starts: 2025, 2026, and 2027 onwards. The final limits are RM3,000,000 revenue, RM3,000,000 total assets and 30 employees, reached for periods starting from 1 January 2027.
- 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.