On 4 August 2017, the Companies Commission of Malaysia has issued a practice directive no 3 entitle “Qualifying Criteria for Audit Exemption for Certain Categories of Private Companies”. The directive set out the category of Company and its criteria toward the eligibility for audit exemption. The Category are:
- Dormant companies,
- Company incorporated on or after 31 January 2017 and annual financial period after that date.
- Company incorporate prior on or before 31 January 2017, the annual financial commences on or after September 2017.
- Zero-revenue companies and
- The annual financial period commences on or after 1 January 2018
- Threshold-qualified companies
- The annual financial period commences on or after 1 July 2018
Based on the staggered commencement date the Company will be exempt from audit effective from 1 January 2018.
The qualification for threshold-qualified companies:-
- Revenue – not exceeding RM100,00
- Total Asset – not exceeding RM300,000 and
- Employee – not more than 5 employees
The Company must meet all qualification based on the current financial statement and the immediate past two financial year.
The Company must audited its financial statement if there is a request from members eligible to vote holding in aggregate of not less than 5% of the total number of shares issues. The request must be submitted in writing not later the one month before that end of that financial year.
However, the company exempted from audit must lodge it unaudited financial statement that comply with the approved accounting standard. The financial statement must also include directors’ report, statement by directors and statutory declaration pursuant to sections 251 and 252 of the Companies Act 2016.
A certificate signed by a director certifying that:-
- No request has been received
- Directors acknowledge their responsibilities for Complying with the requirement of the Company act 2016 in respect of accounting record and financial statement.
- The financial statements have been prepared in accordance with the Malaysian Accounting Standard Board (MASB).
- That the unaudited financial statements have been circulated to the member in accordance with the Companies Act 2016.
The audit exemption is the main concern of Approved Company Auditors in Malaysia. However changes have created new services from assurance to compilation work. This will relieve the auditor to comply with rigid audit procedure and risk at a small fees. Most small companies are auditors dependent in preparing their financial statement, so there is no reduction in revenue.