Does Your Sdn Bhd Still Need an Audit? Audit Exemption 2025 Explained

For most of the last decade, almost every private limited company (Sdn Bhd) in Malaysia had to have its financial statements audited every year. That changed with the Companies Commission of Malaysia (SSM) issuing Practice Directive No. 10/2024, which introduced revised qualifying criteria for audit exemption that take effect for financial years beginning on or after 1 January 2025.

If you run a small Sdn Bhd, you may now be able to skip the statutory audit — but only if you genuinely qualify, and only if you still meet your other filing duties. Here is a clear breakdown.

What changed under Practice Directive 10/2024

The new directive replaces the older categories (dormant, zero-revenue, and threshold-qualified companies under the previous Practice Directive 3/2017) with a single, simpler test based on three measures: turnover, total assets, and number of employees. A qualifying private company can choose not to appoint an auditor for that financial year.

The three qualifying criteria

A private company may qualify for audit exemption if it meets at least two of the following three criteria for the current financial year and each of the two immediately preceding financial years:

• Annual revenue does not exceed the applicable threshold;
• Total assets do not exceed the applicable threshold; and
• Number of employees does not exceed the applicable limit.

Meeting only one of the three is not enough — you need two of three, consistently across three years.

The thresholds are phased in over three years

To ease the transition, SSM is raising the thresholds in stages rather than all at once. The earliest phase, for financial years beginning in 2025, starts lower — broadly revenue of up to RM1 million, total assets of up to RM1 million, and up to 10 employees — and the limits step up over the following phases towards the full level of RM3 million revenue, RM3 million total assets, and 30 employees.

Because the exact figure for each financial year is set by the phase that applies to it, you should confirm the precise threshold for your year-end against Practice Directive 10/2024 on the SSM portal (or ask your auditor) before relying on it. Note also that submission of the relevant unaudited financial statements for the first phase begins from 1 January 2026.

Dormant companies

Dormant companies remain exempt from audit as before — broadly, a company that has been dormant since incorporation, or dormant throughout both the current and the immediately preceding financial year.

Who still cannot claim exemption

Some companies must be audited regardless of how small they are. The exemption does not apply to public companies, foreign companies, exempt private companies, or a private company that is a subsidiary of a public or listed company. If your company sits inside a group, also remember that a subsidiary being exempt does not relieve the group auditor of their responsibilities over the consolidated accounts.

Exemption is optional — and you still have to file

Qualifying does not force you to drop the audit. Many directors keep auditing voluntarily because banks, investors, landlords, grant agencies, and incoming shareholders frequently ask for audited financial statements, and an independent audit still adds credibility and helps catch errors. Crucially, even an exempt company must still prepare and lodge unaudited financial statements with SSM in the prescribed format — the exemption removes the auditor, not the reporting.

If you are unsure whether your Sdn Bhd qualifies, or whether dropping the audit is the right call for your lenders and shareholders, our team can walk you through it. Learn more about our statutory audit service or request a quote.