What is Audit Exemption?

Audit exemption means that certain companies are not required to have their financial statements audited by an external auditor. This can help reduce costs and administrative burdens for small and micro businesses.

Why was Audit Exemption Introduced?

The audit exemption was introduced to:

1. Reduce Financial Burden: Lower the costs associated with mandatory audits for small and micro businesses.

2. Encourage Business Growth: Allow businesses to allocate resources to other areas, such as expansion and development.

3. Simplify Compliance: Make it easier for small businesses to comply with regulatory requirements.

New Qualifying Criteria for 2025

Starting from January 1, 2025, the qualifying criteria for audit exemption have been updated. A private company qualifies for audit exemption if it meets at least two of the following criteria:

1. Annual Revenue: The company's annual revenue during the current financial year and the immediate past two financial years does not exceed RM 3,000,000.

2. Total Assets: The company's total assets in the current statement of financial position and the immediate past two financial years do not exceed RM 3,000,000.

3. Number of Employees: The company has no more than 30 employees at the end of the current financial year and the immediate past two financial years.

Implementation Timeline

The implementation of the new audit exemption criteria is being carried out in phases:

  • Phase 1 (2025): For financial periods commencing on or after January 1, 2025, and ending on December 31, 2025. Submission year begins from January 1, 2026. Thresholds: Turnover RM 1,000,000, Assets RM 1,000,000, Employees 10.
  • Phase 2 (2026): For financial periods commencing on or after January 1, 2026, and ending on December 31, 2026. Submission year begins from January 1, 2027. Thresholds: Turnover RM 2,000,000, Assets RM 2,000,000, Employees 20.
  • Phase 3 (2027): For financial periods commencing on or after January 1, 2027. Submission year begins from January 1, 2028. Thresholds: Turnover RM 3,000,000, Assets RM 3,000,000, Employees 30.

Benefits of Audit Exemption

1. Cost Savings: Reduces the need for costly audits.

2. Simplified Compliance: Makes it easier for small businesses to comply with regulatory requirements.

3. Resource Allocation: Allows businesses to allocate resources to growth and development.