AUDIT EXEMPTION GUIDE

The Madani Government strive to improve efficiency and cost effectiveness for the Sdn. Bhd. to carry on business in Malaysia. In this regards, SSM has proactively and vigorously enhanced audit exemption on Sdn. Bhd., taking effect beginning 2026 in stages as follow:

SDN BHD

Year	2025 (First Stage）	2026 (Second Stage）	2027 (Third stage）
Financial Period	From 1.1.2025 to 31.12.2025	From 1.1.2026 to 31.12.2026	From 1.1.2027 to 31.12.2027
Lodgement	Lodgement of financial statement from 1.1.2026	Lodgement of financial statement from 1.1.2027	Lodgement of financial statement from 1.1.2028
Fulfillment of any Two Conditions	Revenue： RM 1,000,000	Revenue： RM 2,000,000	Revenue： RM 3,000,000
	Gross Assets: RM1,000,000	Gross Assets: RM2,000,000	Gross Assets: RM3,000,000
	Total Employees: 10	Total Employees: 20	Total Employees: 30

Companies Act 2016, Legislation

The appointment of an auditor in a financial year to carry out statutory audit on the financial statements and accounts for a company incorporated in Malaysia is Mandatory. [S.267(1)]. However, SSM has the power to exempt Sdn. Bhd. from audit compliance with the fulfilment of the designated conditions based on audited financial statements in 2025.

With effect from 2026, Sdn. Bhd. with the compliance of any two the conditions below would be eligible for audit exemption:

Annual turnover of the company during the 2025 financial year does not exceed RM1 million;
Total assets of the company in the statement of financial position of 2025 does not exceed RM1 million; or
The number of employees at end the financial year 2025 does not exceed 10.

The Sdn. Bhd. is further required to fulfil the same conditions compliance. Any of the two conditions above in the immediately preceding 2 years (2023,2024) to be eligible for audit exemption to take effect in year 2026.

Likewise, with effect from 2027, Sdn. Bhd. with the compliance with any of the two conditions below in the financial year 2026 would be eligible for audit exemption:

Annual turnover of the company during the 2026 financial year does not exceed RM2million;
Total assets of the company in the statement of financial position of 2026 does not exceed RM2 million; or
The number of employees at end the financial year 2026 does not exceed 20.

With effect from 2028, Sdn. Bhd. with the compliance with any of the two conditions below in the financial year 2027 would be eligible for audit exemption:

Annual turnover of the company during the 2027 financial year does not exceed RM3million;
Total assets of the company in the statement of financial position of 2027 does not exceed RM3 million; or
The number of employees at end the financial year 2027 does not exceed 30.

Dormant Company

Dormant company is eligible for audit exemption. Dormant company means company not in operation at the time of incorporation or cessation of business with the limited statutory expenses as follows:

Annual accounting fee;
Audit fee
Tax compliance fee
Company secretary charges on
1. Submission on annual returns
2. Update of register of shareholders, directors and secretary
3. Disclosure of beneficiary ownership

Exclude:

Payment on behalf for its related company

Exclusion of Audit Exemption:

Audit exemption does not apply to:

A Sdn. Bhd. that is a subsidiary of a Bhd Company (Listed or Unlisted);
Exempt Private Company which required to have its audited financial statements to be circulated to its members [s.260(2)(b)] as the condition compliance to lodge a certificate to SSM in relating to its exempt private company status.

Cessation of Audit Exemption:

Once a Sdn. Bhd. no longer fulfilled any of the 2 conditions that eligible for the audit exemption in any financial year, that financial year would require to be audited. The prior years that qualify for audit exemption remain valid. There is not necessary to do prior year audit.

Reference from SSM