New Proposed Audit Exemption for Sdn Bhd Malaysia

01Audit Exemption - A higher threshold in qualifying criteria for exemption from audit

02Background

This article relates to the qualifying criteria for the Audit Exemption (AE) that we published on 8 February 2022.

Suruhanjaya Syarikat Malaysia (SSM) issued a Consultative Document on the Proposed Review of AE Criteria for Private Companies in Malaysia on 2 February 2023 with the purpose to seek public response and feedback upon the proposal of new thresholds for the following categories:

1. Zero-Revenue Companies

• Turnover: No changes as remain at RM0

• Total Assets: Increase from RM300,000 to RM500,000 for the current financial year and the immediate past 2 financial years.

2. Threshold-Qualified Companies

• Turnover: Increase annual revenue from RM100,000 to RM1,000,000 during the current financial year and the immediate past 2 financial years.

• Total Assets: Increase from RM300,000 to RM1,000,000 for the current financial year and the immediate past 2 financial years.

• Employees: Increase from not more than 5 to not more than 30 employees at the end of its current financial year and immediate past 2 financial years.

SSM remains the same threshold for Dormant Companies category.

03SSM Findings

From the Consultative Document (CD), SSM considered the following in formulating the above proposal:

1. SSM analysis on data available as at 30 November 2022

From Table 2 and Table 3 of the CD, the statistics reflected the overall percentage of AE submissions at a very low rate since the introduction in the year 2017.

Financial Year Ended (Rate)

2020 6%

2019 7%

2018 4%

04SSM Explanation

Tag along in the analysis rate, SSM also listed 4 possible reasons for the low rate summaries as below :

a. awareness on the eligibility for AE;

b. procedure imposed by related bodies (such as licensing and regulatory authorities, banks) which require audited Financial Statement;

c. Company Directors' option to submit the audited Financial Statement; and

d. Other factors - limitation of data on the number of employees cause the requirement to submit the audited Financial Statement.

2. Findings of a survey

The Malaysian Institute of Accountants (MIA) conducted a survey in the year 2021 on “The Impact of Audit Exemption on Small Companies and Audits Firms.

MIA reported their findings summaries as below:

a. reasons to option for AE or not; and

b. the majority of respondents agreed to increase the threshold.

3. SSM comparative study in other 3 jurisdictions (United Kingdom, Australia and Singapore) on the trend of AE.

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