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SSM Update – Audit Exemption

On 2 February 2023, the Companies Commission of Malaysia (CCM) or in Malay, Suruhanjaya Syarikat Malaysia (SSM) set forth a proposal to increase the audit exemption threshold. In the proposal, the following has changed:

  1. Zero revenue companies with up to RM500k in total assets for the current & 2 immediate previous financial years will enjoy audit exemption. (Increased from RM300k to RM500k)
  2. Threshold-qualified companies with revenue less than RM1mil, total assets less than RM1mil & having no more than 30 employees during the current & 2 immediate previous financial years can enjoy the audit exemption. (Current requirements are RM100k revenue, RM300k total assets & 5 employees)

Statutory Audit

For those unaware, all companies in Malaysia (excluding audit exemptions) are required to perform a statutory audit every financial period. This requires the company to appoint an external auditor, usually on an annual basis, to check the books & records of the company and provide an opinion on the financial statements. This opinion will inform the shareholders of the trustworthiness of the company’s books.

Audit Exemption

This exemption gives qualifying companies the choice to perform a statutory audit or not. Should the proposal be accepted, the criteria for audit exemption are as follows:
Dormant companies: Dormant since incorporation or dormant in the current & immediate previous financial year.
Zero revenue companies: Have no revenue & total assets of less than RM 500,000 during the current & 2 immediate previous financial years.
Threshold-qualified companies (i.e., normal active companies): Revenue less than RM1mil, total assets less than RM1mil & having no more than 30 employees during the current & 2 immediate previous financial years.
Dormant companies, as defined by the Malaysian Accounting Standards Board (MASB), do not carry on business nor have any accounting transactions (excluding any compliance adjustments & costs).
Keep in mind that a company audit exemption could still be required to perform an audit if a letter is issued by SSM or shareholders with no less than 5% voting rights. This letter must be received by the company at the latest 1 month before the end of the financial year.

Submission of Financial Statements
Without the exemption, the audited financial statements must be circulated to all shareholders within 6 months from the end of the financial year. The financial statement must then be submitted to SSM within 30 days of circulation.
For companies with audit exemption, the unaudited financial statements must go through similar processes, with the same statutory requirements & deadlines. The only difference is that an Audit Exemption Certificate must also be submitted along with the unaudited financial statements to SSM.
The proposal for audit exemption thresholds is a welcoming change if accepted. The original threshold for threshold-qualified companies was too low for consideration in this current age. This limited the application of audit exemption to only the smallest of businesses. This change will definitely lessen the burden of small businesses (possibly some medium-sized businesses too) amidst the rising cost of everything.
However, having more businesses be audit exempted may also lead to a higher risk of fraud to shareholders. External auditors serve as independent judges of the company’s books & records, and many shareholders see value in this requirement, especially when the shareholders are not involved in the day-to-day activities of the company. In this scenario, shareholders must exercise their power to require a statutory audit when necessary.
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Official announcement by SSM:

Practice Directive – Audit Exemption:

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