Guide to Audit Exemption of Private Companies in Malaysia-Company Formation_Trademark Registration_Tax Service - Hong Kong CPA

KNOWLEDGE

Hot Labels

hong kong company singapore company u.s. business bank account hong kong catering business

Service Scope KAIZEN CPA provides Audit , Accounting, Tax Advisory, Hong Kong Company Formation, Offshore Company Registration, China Company Formation, Trademark Registration, Tax Service.

Guide to Audit Exemption of Private Companies in Malaysia

【Font：L M S】

Guide to Audit Exemption of Private Companies in Malaysia

Unless otherwise indicated, the company stated in this article refers to the private company incorporated in Malaysia in accordance with the Malaysian Companies Act 2016 (CA 2016).

Pursuant to Section 267(2) of the CA 2016, the Registrar shall have the power to exempt any private company from the requirement to appoint an auditor for each financial year of the company. Practice Directive No. 3/2017 issued by the Companies Commission of Malaysia (CCM) has set out the qualifying criteria for certain categories of private companies from having appoint an auditor in a financial year, i.e. audit exemption.

This audit exemption is not applicable to an exempt private company which has elected to lodge a certificate relating to its status as an exempt private company to the Registrar in accordance with Section 260 of the CA 2016.

Threshold of the Qualifying Criteria for Audit Exemption

The following categories of private companies are qualified for audit exemption:

(1)	Dormant companies A dormant company is a private entity as defined by the Malaysian Accounting Standards Board (MASB) and the company is qualified for audit exemption if: (a) It has been dormant from the time of its incorporation; or (b) It is dormant throughout the current financial year and in the immediate preceding financial year. A company is dormant if it does not carry on business and there is no accounting transaction occurred.
(2)	Zero-revenue companies 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: (a) It does not have any revenue during the current financial year; (b) It does not have any revenue in the immediate past two (2) financial years; and (c) 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 (2) financial years. Revenue as mentioned above 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 derecognition of property, plant, equipment and investment property in the Statement of Comprehensive Income. A company ceases to be inactive where there is revenue received or receivable. Any expenses incurred in maintaining the company is disregarded.
(3)	Threshold-qualified companies A threshold-qualified company is a private entity as defined by the Malaysian Accounting Standards Board (MASB) and the company is qualified for audit exemption if: (a) It has revenue (including revenue receivable) not exceeding RM100,000 during the current financial year and in the immediate past two (2) financial years; (b) 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 (2) financial years; and (c) 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.

Requirements for the Submission of Accounts

(1)	Any company that elects to be exempted from audit must lodge its unaudited financial statements with the Registrar accompanied with the audit exemption certificate signed by a director or person who is primarily responsible for the financial management of the company within thirty days from the circulation date of the unaudited financial statements and reports to its shareholders under section 258 of the CA 2016.
(2)	The unaudited financial statements prepared shall comply with applicable approved accounting standards pursuant to subsection 244(1) of the CA 2016.
(3)	The unaudited financial statements shall be lodged together with the directors’ report, statement by directors and statutory declaration pursuant to sections 251 and 252 of the CA 2016.

Cessation of Audit Exemption

Where a company which is exempt from audit requirements ceases to be so qualified, it shall thereupon cease to be so exempt but it shall remain so exempt in relation to accounts for the financial years in which it qualifies.

A company that is eligible for audit exemption shall be required to audit its accounts if it receives a notice in writing requiring the company to audit its accounts during a financial year but not later than one month before the end of that financial year from:

(1)	any member or members eligible to vote and holding in aggregate of not less than 5% of the total number issued shares of the company or any class of those shares;
(2)	not less than 5% of the total number of members eligible to vote in of the company; or
(3)	the Registrar who directs the company to have its accounts audited.

Proposed Review of Audit Exemption Criteria

On 2 February 2023, the CCM issued a Consultative Documents on the Proposed Review of Audit Exemption Criteria for Private Companies in Malaysia seeking public feedback on its proposal to introduce new thresholds for several of the qualifying criteria for audit exemption set out in Practice Directive No. 3/2017.

If the proposed changes in the Consultative Document are adopted, the revised qualifying criteria for audit exemption will be as set out below:

No.	Type of private company	Proposed New Criteria
1.	Dormant Companies	No change
2.	Zero-Revenue Companies	Companies must fulfil the following requirements: a. No revenue during the current financial year; b. No revenue in the immediate past two (2) financial years; and c. Total assets do not exceed RM500,000 for the current Statement of Financial Position and in the immediate past two (2) financial years.
3.	Threshold-Qualified Companies	Companies must fulfil the following requirements: a. Annual revenue not exceeding RM1,000,000 during the current financial year and the immediate past two financial years; b. Total assets in the current Statement of Financial Position of RM1,000,000 or less and in the immediate past two financial years; and c. Has not more than 30 employees at the end of its current financial year and in the immediate past two financial years.

Kaizen, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professionals in Kaizen for further clarification.

Disclaimer

All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.

If you wish to obtain more information or assistance, please visit the official website of Kaizen CPA Limited at www.kaizencpa.com or contact us through the following and talk to our professionals:
Email: info@kaizencpa.com
Tel: +852 2341 1444
Mobile : +852 5616 4140, +86 152 1943 4614
WhatsApp/ Line/ WeChat: +852 5616 4140
Skype: kaizencpa

KNOWLEDGE

Hot Labels

SHARE

Guide to Audit Exemption of Private Companies in Malaysia

Related Articles