Criteria for Audit Exemption for Private Companies

Every private company is required to appoint an auditor for each financial year of the company for purposes of auditing its financial statements.


The following categories of private companies qualify for audit exemption:


(a) Dormant companies

(b) Zero-Revenue Companies

(c) Threshold-Qualified Companies


Dormant Companies


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 company is dormant in a financial year if the company does not carry on business and there is no accounting transaction occurred. Accounting transaction means a transaction, accounting or other records which is required to be kept, excluding a transaction arising from any obligations that the company is required to abide by any laws to pay and its related costs to comply.


Zero-Revenue Companies


A zero-revenue company qualifies for audit exemption if it does not have any revenue during the current financial year, 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.


Revenue 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.


Threshold-Qualified Companies


A threshold-qualified company qualifies for an audit exemption if it has revenue not exceeding RM100,000 during the current financial year and in the immediate past two (2) financial years, its total assets in the current Statement of Financial Position (FS) does not exceed RM300,000 and in the immediate past two (2) financial years, and 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.


Revenue includes revenue receivable during the year.


OTHER CONDITIONS


Where a company which is exempt from audit requirements ceases to be qualified, it shall thereupon cease to be exempt but it shall remain 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:–


(a) any member or members eligible to vote and holding in aggregate of not less than 5% of the total number of issued shares of the company or any class of those shares;

(b) not less than 5% of the total number of members eligible to vote in of the company; or

(c) the Registrar who directs the company to have its accounts audited.


REQUIREMENTS FOR THE SUBMISSION OF ACCOUNTS


Any company that elects to be exempted from audit must lodge its unaudited financial statements with the Registrar accompanied with the required certificate.


The unaudited financial statements prepared shall comply with applicable approved accounting standards. The unaudited financial statements shall be lodged together with the directors’ report, statement by directors and statutory declaration. In addition, the unaudited financial statements must also be accompanied by a certificate stating the matters as set out in Appendix I within thirty days from the circulation date of the unaudited financial statements and reports are circulated.


The certificate is to be signed by a director certifying to the best of his knowledge and belief for the financial year ended 31 xxx 20xx, the company is entitled to exemption from audit relating to private companies and, where the director is not primarily responsible for the financial management of the company, the name of the person responsible should also be stated.


The exemption will not be applicable to an exempt private company which has chosen to lodge a certificate relating to its status as an exempt private company to the Registrar pursuant to section 260 of the CA 2016.


APPENDIX I


Audit Exemption Certificate


(1) The certificate should state that :-


(i) Members have not required the company to perform an audit of its accounts for that year.

(ii) The directors acknowledge their responsibilities for complying with the requirements of the Companies Act 2016 with respect to accounting records and the preparation of financial statements.

(iii) These financial statements have been prepared in accordance with applicable approved accounting standards issued by Malaysian Accounting Standards Board (MASB), namely the Malaysian Private Entities Reporting Standard (MPERS) and complies with the requirements of the Companies Act 2016.


(2) The unaudited financial statements and reports made up to 31 XXXX 20XX required under the Companies Act 2016 have been circulated to the members on 30 XXXX 20XX.


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