Audit Exemption in Malaysia (2025): PD 10/2024, the New Thresholds, and Which Foreign-Owned Sdn Bhds Can Skip the Audit

For decades, every Malaysian private company — no matter how small or how dormant — had to appoint an external auditor and file audited accounts each year. That changed with Practice Directive No. 10/2024, issued by the Companies Commission of Malaysia (SSM) on 16 December 2024. For financial periods beginning on or after 1 January 2025, many small private companies can now skip the statutory audit entirely. For a foreign investor running a lean Malaysian Sdn. Bhd., that can mean a few thousand ringgit and several weeks of every year back — but only if you understand who qualifies, who is deliberately excluded, and what still has to be done even when no audit is required. This guide walks through the new rules end to end.

What "audit exemption" actually means

Under Section 267 of the Companies Act 2016, every company must appoint an auditor for each financial year — unless it is exempted by the Registrar. Audit exemption is that carve-out: it releases a qualifying private company from the duty to have its financial statements audited and to lodge audited accounts with SSM. It does not remove the duty to keep proper accounting records, to prepare financial statements, to circulate them to members, or to lodge them with SSM — those obligations remain. In plain terms, an exempt company still produces a full set of accounts every year; it simply does not pay an auditor to sign off on them.

This matters because the audit is often the single largest recurring compliance cost for a small company. Removing it does not remove the accounting work — it removes the independent verification layer on top of it.

The old system vs. the new one

Before PD 10/2024, audit exemption in Malaysia existed but was narrow, defined by three separate categories introduced in 2017: dormant companies, zero-revenue companies, and threshold-qualified companies (with very low turnover and asset limits). Many active small businesses fell outside all three and were forced to audit accounts that no bank or tax officer ever scrutinised in detail.

PD 10/2024 replaces that patchwork with a single, cleaner framework based on turnover, total assets and headcount, phased upward over three years so that progressively more companies qualify. The dormant-company route survives alongside it. The goal, stated by SSM, is to cut compliance costs for genuine micro and small enterprises while keeping audit where it protects third parties.

The new qualifying criteria: any two of three

A private company qualifies for audit exemption for a financial year if it meets at least two of the following three criteria, and — critically — meets them not only in the current financial year but also in each of the two immediately preceding financial years. This "current year plus two look-back years" test is what stops a company from dipping in and out of exemption on a single good or bad year.

The thresholds ramp up because SSM is easing the market into the change. By Phase 3, a company can have up to RM3 million in revenue, RM3 million in assets and 30 staff and still be exempt — as long as it satisfies any two of those three limits across the required years. A company with RM2.8 million turnover but only RM500,000 in assets and 8 staff in 2027, for instance, meets the assets and headcount tests and qualifies, even though its revenue is high.

The dormant-company route

Separately from the threshold test, a company is exempt from audit if it is dormant — meaning it has had no accounting transaction during the relevant period. Two situations qualify:

• Dormant from incorporation. A company that has been dormant since the day it was incorporated is exempt for that period.
• Dormant in the current and immediately preceding financial year. An existing company that goes fully dormant across both the current and the prior financial year is exempt for the current year.

Note that certain routine items — such as the initial subscriber shares, statutory fees paid to SSM, or fees to maintain the registered office — do not by themselves break dormancy. This route is common for holding companies and special-purpose vehicles that hold an asset but do not trade.

Who is excluded — and why foreign investors must read this twice

Audit exemption is only ever available to a private company (Sdn. Bhd.). Even where the numbers fit, the exemption does not apply to:

• a public company (Berhad), whether listed or not;
• a foreign company — that is, a foreign entity that has registered a branch in Malaysia under Division 2 of Part II of the Companies Act 2016 (Section 561 onward);
• a private company that is a subsidiary of a public/listed company, or in which a public company holds shares, where consolidation requires audit;
• any company required to be audited under other written law — for example entities licensed by Bank Negara Malaysia (banks, insurers) or the Securities Commission.

What you still have to do when you are exempt

Being audit-exempt is not the same as being compliance-free. A qualifying company must still:

1. Keep proper accounting records under Section 245 of the Companies Act — for at least seven years.
2. Prepare unaudited financial statements for the financial year, in line with the applicable approved accounting standards.
3. Circulate the financial statements to members within the statutory period, accompanied by the required exemption certificate/declaration from the directors confirming the company qualifies and that no member has required an audit.
4. Lodge the unaudited financial statements with SSM together with the annual return.
5. File its corporate tax return (Form C) with LHDN — audit exemption has no effect on tax obligations. Tax computations must still be prepared from proper accounts. See our corporate tax and SST compliance guide.

Crucially, any member or members holding the requisite shareholding can, by notice, require the company to have its accounts audited for a given year even if it otherwise qualifies for exemption. The exemption is a default, not an absolute right.

When you should audit anyway — even if exempt

The right question is not only "can we skip the audit?" but "should we?" There are real situations where a small company voluntarily keeps auditing:

Costs, timing and the decision each year

A statutory audit for a small Sdn. Bhd. in Malaysia typically costs from around RM1,500 to RM5,000+ a year depending on transaction volume and complexity, on top of bookkeeping and tax fees. Preparing unaudited accounts still costs something — you or your accountant must produce the full statements — but it removes the auditor's fee and the back-and-forth audit fieldwork, usually saving both money and a few weeks of the annual closing cycle.

The audit-exemption decision is made each financial year, based on that year's and the prior two years' figures. It is not a one-time election. A company that qualifies this year may cross a threshold next year and have to re-appoint an auditor — so the test should be re-run at each year end as part of the annual close.

How ONE KEY handles it for you

In practice, the audit-exemption assessment sits naturally within your annual accounting and secretarial cycle: bookkeeping produces the numbers, we test them against the PD 10/2024 criteria and the exclusion list, prepare the directors' exemption declaration and the unaudited financial statements, and lodge everything with SSM alongside the annual return — while keeping your company secretary and tax filings aligned. Where an audit still makes commercial sense, we tell you plainly and arrange it. If you are a foreign investor unsure whether your structure even qualifies, or whether you are a "foreign company" branch or a private Sdn. Bhd., that is exactly the kind of question to settle before your first year end.

Talk to us about your company's audit exemption and annual compliance on our contact page, or explore the company audit and annual bookkeeping services directly.

This article is general information only, not legal, tax or immigration advice. Policies, thresholds and official fees are set by the relevant Malaysian authorities and may change. Talk to our consultants about your specific situation.