New Audit Exemption Criteria – Does Your Company Qualify?
Suruhanjaya Syarikat Malaysia (SSM) has issued Practice Directive No. 10/2024, which introduces new qualifying criteria for audit exemption for certain private companies under Section 267(2) of the Companies Act 2016 (CA 2016).
This latest directive marks an important update for private companies in Malaysia, particularly those seeking to determine whether they remain eligible for audit exemption. Understanding these new criteria is crucial to ensure your company stays compliant and well-prepared for upcoming financial reporting obligations. Practice Directive No. 10/2024 supersedes Practice Directive No. 3/2017 and will be implemented in phases, beginning with financial periods starting on or after 1 January 2025.
1. Background
Under Section 267(1) of the Companies Act 2016, every private company is required to appoint an auditor annually. However, Section 267(2) empowers the Registrar to exempt certain private companies from appointing an auditor if they meet qualifying conditions prescribed by the Registrar.
Practice Directive No. 10/2024 sets out these updated qualifying thresholds to encourage efficiency and compliance for micro and small enterprises.
2. New Qualifying Criteria
A private company may qualify for audit exemption if it meets any two (2) of the following three (3) criteria for the current and immediately preceding two (2) financial years:
Criteria | Threshold (Full Implementation by FY starting on/after 1st January 2027) |
Revenue | Not more than RM3,000,000 |
Total Assets | Not more than RM3,000,000 |
Number of Employees | Not more than 30 |
Note: Lower thresholds apply during the transition period (see below)
3. Companies Not Eligible
The following types of companies cannot claim audit exemption under this directive:
- Public companies (including subsidiaries of public companies)
- Foreign companies
- Companies that have lodged an Exempt Private Company (EPC) certificate under Section 260 of CA 2016.
4. Implementation Timeline (Phased Approach)
Year | 2025 (Phase 1) | 2026 (Phase 2) | 2027 (Phase 3) |
Financial period
| Commencing on or after 1st January 2025 until 31st December 2025 | Commencing on or after 1st January 2026 until 31st December 2026 | Commencing on or after 1st January 2027 |
Submission year | Beginning from 1 January 2026 | Beginning from 1 January 2027 | Beginning from 1 January 2028 |
Threshold :
| RM1,000,000
RM1,000,000
10 | RM2,000,000
RM2,000,000
20 | RM3,000,000
RM3,000,000
30 |
5. Company’s Responsibility
Even if a company qualifies for audit exemption, it must still:
- Prepare unaudited financial statements in compliance with approved accounting standards (e.g. MPERS);
- Lodge the financial statements with SSM within the statutory period; and
- Maintain proper accounting records as required under Sections 245 and 246 of CA 2016.
If the company fails to meet the criteria in a subsequent financial year, an audit will be required for that year.
6. What You Should Do
We encourage all clients to:
- Review your company’s financial performance, assets, and employee count;
- Assess whether your company qualifies for audit exemption; and
- Discuss with your company secretary or auditor before deciding to apply the exemption.
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