Understanding the New Audit Exemption Criteria in Malaysia: What You Need to Know

Updated October 2026: The Companies Commission of Malaysia (SSM) introduced revised audit-exemption criteria for private companies under Practice Directive 10/2024, applicable to financial periods commencing on or after 1 January 2025. The regime is being implemented progressively over three phases from 2025 to 2027.

These changes aim to reduce the compliance burden on eligible micro and small private companies while preserving financial accountability and reporting obligations.

What’s Changed?

Under the new framework, private companies in Malaysia may qualify for an audit exemption if they meet at least two of the following conditions for both the current and preceding two financial years:

• Phase 1 (financial periods commencing in 2025): turnover not exceeding RM1,000,000; assets not exceeding RM1,000,000; no more than 10 employees.
• Phase 2 (financial periods commencing in 2026): turnover not exceeding RM2,000,000; assets not exceeding RM2,000,000; no more than 20 employees.
• Phase 3 (financial periods commencing on or after 1 January 2027): turnover not exceeding RM3,000,000; assets not exceeding RM3,000,000; no more than 30 employees.

A private company must satisfy at least two of the three applicable criteria, subject to the detailed conditions in Practice Directive 10/2024 and SSM’s current guidance.

These criteria provide significant relief for small businesses that may otherwise find it burdensome to engage in full-scale audits. However, it’s important to note that the audit exemption applies only to private companies that are considered “small” under these thresholds, and businesses that exceed these limits will still be required to undergo a full audit.

Phased Implementation

The thresholds increase progressively. Phase 1 applies to financial periods commencing during 2025, with submissions beginning from 1 January 2026. Phase 2 applies to financial periods commencing during 2026, with submissions beginning from 1 January 2027. Phase 3 applies to financial periods commencing on or after 1 January 2027, with submissions beginning from 1 January 2028.

Companies should therefore assess eligibility using the threshold applicable to the relevant financial period, rather than applying the final Phase 3 thresholds retrospectively to earlier years. For the latest criteria and exclusions, refer to SSM’s audit-exemption guidance.

Additional Requirements

Although the audit exemption allows for reduced financial scrutiny, qualifying companies will still be required to submit unaudited financial statements and directors’ reports in compliance with the Companies Act 2016. These reports must reflect the true and fair view of the company’s financial position and must be submitted annually to the Companies Commission.

It’s also important to note that certain types of companies, such as those involved in regulated industries or holding public funds, may not qualify for the audit exemption, even if they meet the size thresholds.

How This Affects Your Business

The introduction of these audit exemption criteria is part of Malaysia’s broader efforts to reduce the regulatory burden on small businesses and promote entrepreneurship. By easing the requirement for annual audits, companies that qualify can save on both time and costs associated with audit processes. This will allow small businesses to reinvest those resources into growing their operations, improving efficiency, or enhancing product and service offerings.

How Iconomy Corporate Can Help

At Iconomy Corporate, we understand the importance of staying compliant with ever-evolving regulations. As part of our commitment to offering comprehensive business solutions, we also provide company formation and corporate services through our Malaysian arm, Iconomy Malaysia Sdn. Bhd..

Whether you’re looking to set up a new business in Malaysia or ensure compliance with the latest audit exemption criteria, our team at Iconomy Malaysia is here to guide you every step of the way. From handling financial statement submissions to ensuring your company remains in good standing with local authorities, we offer tailored solutions to meet the unique needs of small businesses.

How to Stay Compliant

With the introduction of these new audit exemptions, it’s crucial for companies to evaluate their eligibility and ensure they comply with the new requirements by 2027. At Iconomy Malaysia Sdn. Bhd., we provide the necessary guidance to ensure your business can take full advantage of the audit exemption while remaining compliant with local law.

Reach out to Iconomy Malaysia today to learn more about the audit exemption criteria and how our expert services can help streamline your business operations in Malaysia.