Given the complexities of financial compliance, it's important to understand the opportunities available to simplify these processes. Since 2017, certain private companies in Malaysia may qualify for an audit exemption under specific conditions set by the Companies Act 2016. This adjustment aims to reduce the administrative burden on smaller companies while maintaining financial integrity. Let’s explore what this means for your business.
Understanding Audit Exemptions
Traditionally, all private companies in Malaysia are required to undergo an annual audit. However, changes introduced in 2017 allow certain companies to forego this requirement under specific circumstances.
Who Can Benefit from an Audit Exemption?
Not all companies will qualify for an exemption. There are three main categories to consider:
1. Dormant Companies
These companies have had no significant accounting transactions throughout the financial year. If your company has not been active in financial transactions apart from those necessary for maintaining its statutory status, you might be eligible for this exemption.
2. Zero-revenue Companies
Companies that have not generated revenue during the current and previous two financial years and had total assets not exceeding RM300,000 in the same period fall under this category.
3. Threshold-qualified Companies
Small enterprises whose annual revenue did not exceed RM100,000 throughout the current and past two financial years, with total assets not surpassing RM300,000 and no more than five full-time employees at the end of these periods, qualify here.
What Does an Audit Exemption Entail?
Choosing the audit exemption route does not exempt a company from maintaining proper financial records or submitting financial statements.
Requirements for Exempt Companies
Even if your company qualifies for an audit exemption, you are still required to submit unaudited financial statements that comply with the accounting standards approved by the Malaysian Accounting Standards Board (MASB). Here's what you should prepare:
A compliance certificate as outlined under Section 260 of the Companies Act 2016.
A detailed directors' report.
A statement from the directors confirming their accountability for maintaining proper accounting records and correct financial statements.
An Audit Exemption Certificate showcasing that the members have agreed to waive the audit requirements for the specified financial year.
Streamlining Your Business with Strategic Financial Guidance
The option for audit exemptions represents an important step forward in reducing regulatory burdens on small—and medium-sized enterprises in Malaysia. It reflects a commitment by Malaysian authorities to support business efficiency and sustainability, particularly for those at crucial growth and development stages.
For companies considering the audit exemption option, navigating these regulations with a clear understanding and strict adherence to statutory requirements is crucial. Ensuring that your company fulfils all conditions accurately is paramount to leveraging these exemptions effectively.
At Douglas Loh & Associates, we specialise in guiding businesses through the intricacies of financial compliance with precision and tailored expertise. Our team is ready to assess if your company qualifies for an audit exemption and to help streamline your financial processes. We believe in empowering businesses by freeing up their resources from routine statutory audits, allowing greater focus on core business growth and operational improvements.
Contact Douglas Loh & Associates today to explore how you can benefit from the audit exemptions and harness our expertise for your business’s financial strategizing and compliance management. Together, let’s take a proactive step towards simplifying your financial obligations while maintaining the highest standards of financial integrity.
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