Audit Exemption Criteria Malaysia 2026: Do I Need an Audit for My Sdn Bhd?
Many small and medium-sized businesses in Malaysia are unsure whether their company is required to appoint an auditor and prepare audited financial statements.
Since audit requirements have changed with the introduction of the revised audit exemption framework by the Companies Commission of Malaysia (SSM), business owners should understand whether their company qualifies for audit exemption.
This guide explains the Malaysia audit exemption criteria for 2026, eligibility requirements, thresholds, and important considerations for Sdn Bhd companies.
What is Audit Exemption?
Audit exemption means a private company that meets the prescribed conditions may be exempted from appointing an auditor and having its financial statements audited.
However, audit exemption does not mean that the company is exempted from preparing financial statements or complying with financial reporting requirements.
A company that qualifies for audit exemption is still required to maintain proper accounting records and prepare financial statements in accordance with the applicable accounting standards and requirements under the Companies Act 2016.
The main difference is that the financial statements are not subject to an external audit by an appointed auditor. Therefore, the financial statements will not contain an auditor’s report or audit opinion page signed by an auditor.
A company claiming audit exemption is still required to prepare financial reporting documents, including:
- Directors’ Statement;
- Directors’ Declaration;
- Statement of Financial Position (Balance Sheet);
- Statement of Profit or Loss and Other Comprehensive Income;
- Statement of Cash Flows;
- Statement of Changes in Equity (where applicable); and
- Notes to the Financial Statements.
The format and presentation of the financial statements are generally similar to audited financial statements, except that they do not include the Independent Auditor’s Report and auditor’s opinion.
Therefore, business owners should understand that audit exemption only removes the requirement for an audit, not the requirement to prepare proper financial statements and comply with statutory filing obligations.
Directors remain responsible for ensuring that the company’s financial records and financial statements are properly prepared and comply with the requirements of the Companies Act 2016.
Do All Sdn Bhd Companies Need an Audit in Malaysia?
No.
Under the revised audit exemption framework introduced by SSM, certain private companies may qualify for audit exemption if they meet the specified criteria.
Companies that do not qualify must continue to appoint an auditor and prepare audited financial statements.
Malaysia Audit Exemption Criteria 2026
A private company may qualify for audit exemption if it meets the relevant conditions relating to:
- Revenue threshold
- Total assets threshold
- Number of employees
The criteria are assessed based on the company’s financial position and operating size.
Companies should review their eligibility carefully because exceeding the prescribed thresholds may result in the requirement to perform an audit.
Malaysia Audit Exemption Criteria (2026)
The revised audit exemption framework introduced by the Companies Commission of Malaysia (SSM) is being implemented progressively over three phases.
To qualify for audit exemption, a private company must satisfy at least two (2) of the following three (3) criteria for the current financial year and the immediate preceding two (2) financial years.
Phase 1
Financial periods commencing on or after 1 January 2025
| Criteria | Threshold |
|---|---|
| Annual revenue | Not more than RM1 million |
| Total assets | Not more than RM1 million |
| Average number of employees during the financial year | Not more than 10 employees |
Phase 2
Financial periods commencing on or after 1 January 2026
| Criteria | Threshold |
|---|---|
| Annual revenue | Not more than RM2 million |
| Total assets | Not more than RM2 million |
| Average number of employees during the financial year | Not more than 20 employees |
Phase 3
Financial periods commencing on or after 1 January 2027
| Criteria | Threshold |
|---|---|
| Annual revenue | Not more than RM3 million |
| Total assets | Not more than RM3 million |
| Average number of employees during the financial year | Not more than 30 employees |
Important Points to Note
Meeting the prescribed thresholds for a single financial year does not automatically qualify a company for audit exemption.
To be eligible, a company must satisfy at least two (2) out of the three (3) prescribed criteria for the current financial year and the immediate preceding two (2) financial years.
As a result, a newly incorporated company will generally not qualify for audit exemption immediately, as it does not have the required financial information for the preceding two financial years to assess whether the qualifying conditions have been met.
Companies should also note that qualifying for audit exemption does not remove the obligation to maintain proper accounting records, prepare financial statements, or comply with the Companies Act 2016 and other statutory filing requirements.
Before deciding not to appoint an auditor, directors should carefully assess whether the company satisfies all applicable audit exemption conditions. Where there is any uncertainty, professional advice should be sought to ensure compliance with the latest SSM audit exemption framework.
Companies That May Not Qualify for Audit Exemption
Certain companies may still require an audit, including:
- Public listed companies
- Public companies
- Companies involved in regulated industries
- Companies that exceed the prescribed thresholds
- Companies required by other laws or regulations to be audited
- Newly Incorporated company without immediate preceding two financial years results
Audit Exemption Does Not Remove Other Compliance Obligations
Even if a company qualifies for audit exemption, directors remain responsible for ensuring proper corporate compliance.
The company may still need to:
- Prepare financial statements;
- Submit Annual Return;
- Lodge financial statements with SSM (where applicable);
- Maintain proper accounting records;
- Comply with tax filing requirements.
Directors should understand that audit exemption does not remove their statutory responsibilities.
Advantages of Audit Exemption
For eligible SMEs, audit exemption may provide:
1. Cost Savings
Companies may reduce professional fees associated with audit engagements.
2. Less Administrative Burden
Management may spend less time preparing audit schedules and responding to audit queries.
3. Faster Financial Reporting Process
Financial statements may be completed more efficiently.
Should a Company Voluntarily Perform an Audit?
Even if a company qualifies for audit exemption, some businesses may still choose to conduct an audit.
Reasons include:
- Bank loan requirements;
- Investor requirements;
- Group reporting requirements;
- Strengthening internal controls;
- Improving credibility with stakeholders.
An audit can provide additional assurance to shareholders, lenders, and business partners.
Audit Exemption vs Audit Requirement: Quick Comparison
| Audit Exemption | Audit Required | |
|---|---|---|
| Auditor appointment | Not required if eligible | Required |
| Audited financial statements | Not required | Required |
| Accounting records | Required | Required |
| Tax filing | Required | Required |
| SSM compliance | Required | Required |
Frequently Asked Questions (FAQ)
Does every Sdn Bhd need an audit in Malaysia?
No. A private company may qualify for audit exemption if it meets the conditions prescribed by SSM.
Is audit exemption automatic?
No. The company must assess whether it satisfies the eligibility criteria. Directors remain responsible for ensuring compliance.
If my company is dormant, does it need an audit?
Certain dormant companies may qualify for audit exemption, subject to meeting the applicable requirements.
Can a bank request audited financial statements even if my company qualifies for exemption?
Yes. Banks, investors, or other stakeholders may request audited financial statements as part of their requirements.
Does audit exemption mean I do not need an accountant?
No. Companies still need proper accounting records and financial statements even if an audit is not required.
Can a Newly Incorporated Sdn Bhd Enjoy Audit Exemption?
Generally, a newly incorporated Sdn Bhd is not immediately eligible for audit exemption because it does not have the required financial information for the current financial year and the immediate preceding two (2) financial years to assess whether it satisfies the prescribed audit exemption criteria.
Under the SSM audit exemption framework, a company is generally required to satisfy at least two (2) of the three (3) qualifying criteria for the current financial year and the immediate preceding two (2) financial years. As a newly incorporated company does not have the required financial history, it will generally not qualify for audit exemption in its first financial year.
Exception for Dormant Companies
An exception may apply to a dormant company.
For the purpose of audit exemption, a dormant company generally refers to a company that has no significant accounting transactions during the financial year. Transactions that are necessary to maintain the company’s legal existence—such as payment of statutory filing fees, annual return filing fees, bank charges, or similar administrative expenses—are generally not regarded as significant accounting transactions.
Where a newly incorporated company remains dormant and satisfies the applicable requirements under the SSM audit exemption framework, it may qualify for audit exemption, subject to the relevant conditions.
Important Points to Note
Business owners should not assume that every newly incorporated Sdn Bhd is automatically exempt from audit.
Before deciding not to appoint an auditor, directors should carefully assess whether the company satisfies all applicable audit exemption conditions, taking into account:
- The company’s financial reporting history;
- Whether the required assessment period has been met;
- Whether at least two (2) of the prescribed qualifying criteria are satisfied; and
- Whether any special conditions or exceptions, such as those applicable to dormant companies, apply.
Where there is any uncertainty, it is advisable to seek professional advice to determine whether the company qualifies for audit exemption before deciding whether the appointment of an auditor is required.
About CLPC Advisors
CLPC Advisors is a Malaysian professional services firm providing unaudit financial report compilation services, tax compliance & advisory, accounting, corporate secretarial, payroll, and business advisory services to startups, SMEs, and growing businesses.
Our team comprises Chartered Accountants, Licensed Tax Agents, and Licensed Company Secretaries with experience helping Malaysian companies manage statutory compliance and business requirements.
We believe professional services should go beyond compliance. Our role is to help business owners understand their obligations, make informed decisions, and build a stronger foundation for sustainable growth.
How CLPC Advisors Can Help
Our team can assist businesses with:
- Audit requirement assessment
- Complication of unaudited Financial report and statement
- Financial statement preparation
- Accounting and bookkeeping
- Corporate secretarial compliance
- Tax compliance and advisory
- SSM compliance review
Whether your company is expanding, restructuring, or reviewing its compliance obligations, CLPC Advisors can provide practical solutions tailored to your business needs.
Last Updated: 12 July 2026