Audit exemption for selected private companies

PETALING JAYA: The Companies Commission of Malaysia has reiterated that under section 267(2) of the Companies Act 2016, dormant, zero-revenue and threshold-qualified private companies are eligible to elect for audit exemption.
It said in a statement that companies that fall under these three categories are exempted from having to appoint an auditor and to impose the criteria and conditions accordingly.
A dormant company qualifies 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.
A zero-revenue 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.
A threshold-qualified company is qualified for an audit exemption if it has revenue not exceeding RM100,000 during the current financial year and in the immediate past two financial years; its total assets in the current FS does not exceed RM300,000 and in the immediate past two financial years; and it has, at the end of its current financial year and in each of its immediate past two financial years' end, not more than five employees.
SSM said while it understands the importance of auditing company accounts in promoting accountability, accuracy and transparency, there is also a need to revisit the value and necessity of an audit towards balancing between the needs of the company and that of its stakeholders.
"It is an undeniable fact that the majority of small SME companies are 'owner-managed' or 'family-run businesses' where the shareholders and directors are typically the same individuals. For these small SMEs, due to the unique structure of its business model, the costs for a conventional audit mandated by law which provides negligible value added to its business may not be a justifiable cost," it explained.