Qualifying Criteria for Audit Exemption for Malaysia Private Companies

In a recent announcement of the Companies Commission of Malaysia (“SSM”) on August 4, 2017, Practice Directive No. 3/2017 entitled “Qualifying Criteria for Audit Exemption for Certain Categories of Private Companies”, the qualifying criteria for audit exemption has been set out for certain private companies.

The Practice Directive No. 3/2017 indicates that the following companies are eligible for audit exemption. 
(a) dormant companies 
(b) zero-revenue companies 
(c) threshold-qualified companies 

Dormant Company Audit Exemption

1. A company is dormant in a financial year if the company does not carry on business and, there is no accounting transaction occurred. 

“Accounting transaction” means a transaction, accounting or other records of which is required to be kept under section 245(1) of the Companies Act 2016, excluding a transaction arising from any obligations that the company is required to abide by any laws to pay and its related costs to comply.

2. A dormant company is qualified for audit exemption if it has been dormant from the time of its incorporation or it is dormant throughout the current financial year and in the immediate preceding financial year.

Zero-Revenue Companies Audit Exemption

1. A zero-revenue company is a private entity as defined by the Malaysian Accounting Standards Board (MASB) and the company is qualified for audit exemption if:

- It does not have any revenue during the current financial year; 
- It does not have any revenue in the immediate past two financial years; and 
- Its total assets in the current Statement of Financial Position (FS) does not exceed RM300,000 as well as in the FS of the immediate past two financial years.

2. “Revenue” does not include credit entries for reversal of accounting entries arising from earlier entries, accounting entries related to taxation, reversal of provisions made earlier and gain on recognition of property, plant, equipment and investment property in the Statement of Comprehensive Income.

3. Any expenses incurred in maintaining the company is disregarded.

Threshold-Qualified Companies Audit Exemption

1. A threshold-qualified company qualifies for an audit exemption if:

- It has revenue (includes revenue receivable during the year) not exceeding RM100,000 during the current financial year and in the immediate past two (2) financial years; 

- Its total assets in the current Statement of Financial Position (FS) does not exceed RM300,000 and in the immediate past two (2) financial years; and 

- It has, at the end of its current financial year and in each of its immediate past two (2) financial years end, not more than five (5) employees.

The Bottom Line

Any company that opts for audit exemption must submit its unaudited financial statements with the Registrar together with the required certificate in compliance with sections 258 and 259 of the Companies Act 2016. Please note that the same set of unaudited financial statement is required, just that the signature of auditor is no longer needed (people can save cost for this reason).

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Edited by: 浪子

Bibliography

Qualifying Criteria for Audit Exemption for Malaysia Private Limited Companies. (n.d.). Retrieved from 
https://www.3ecpa.com.my/resources/corporate-compliance-requirement/qualifying-criteria-for-audit-exemption-for-malaysia-private-limited-companies/