Audit exemption in Malaysia: a playbook for SMPs under PD 10/2024

What actually changed

On 16 December 2024, the Companies Commission of Malaysia (SSM) issued Practice Directive No. 10/2024, issued under section 20C of the Companies Commission of Malaysia Act 2001 and subsection 267(2) of the Companies Act 2016. It sets out the qualifying criteria for audit exemption for certain categories of private companies, and applies to financial statements for financial periods commencing on or after 1 January 2025.

Who actually qualifies

To qualify for the exemption, a private company must meet at least two of the following three criteria, assessed over the current financial year and the two immediately preceding financial years:

• Annual turnover not exceeding RM3,000,000
• Total assets not exceeding RM3,000,000
• No more than 30 employees

Meeting two of the three is enough; a company doesn't need to satisfy all three at once. That said, an exempt company is not excused from preparing financial statements altogether: it still has to prepare and submit them to SSM in the prescribed format, it simply doesn't need an external auditor to sign off on them first.

Why this is a bigger deal for SMPs than for the companies themselves

For the companies that qualify, this is a straightforward compliance-cost reduction. For small and medium accounting practices (SMPs), it's a direct hit to a historically reliable income line. MIA's own Accountants Today coverage of the rising exemption thresholds notes that a significant share of firms expect a high impact on their audit fee revenue, since statutory audits have traditionally been a reliable, recurring source of income for exactly the kind of small and medium clients this directive now exempts.

MIA's recommended response

MIA's guidance for SMPs facing this shift lays out a three-part approach:

1. Assess the impact client by client. Segment the client book using the 2-out-of-3 criteria to work out which clients actually qualify for exemption, rather than assuming the whole book is affected equally.
2. Engage clients proactively. Start the conversation about what audit exemption means for them before they claim it, rather than reacting after a client tells the firm they no longer need an audit.
3. Diversify into higher-value services. MIA specifically points to accounting outsourcing, advisory work, ESG assurance and part-time CFO services as the natural places for SMPs to redirect capacity that audit work used to fill.

The framing MIA uses is worth repeating directly: the shift is from being a compliance enforcer to being a trusted advisor.

Where the capacity for that shift actually comes from

Diversifying into outsourced accounting and advisory work sounds straightforward until you look at the economics: those services generally carry thinner margins per client than a statutory audit did, which means a firm needs to serve more clients, or serve them more efficiently, to replace the revenue an audit engagement used to bring in. That's a capacity problem before it's a strategy problem, and it's the same capacity problem that sits behind receipts piling up on WhatsApp and bank statements getting retyped by hand every month.

Automating that manual layer, receipts, bank statements, reconciliation, doesn't replace the advisory judgement MIA is pointing firms toward, but it's what makes taking on more outsourced accounting clients at thinner margins actually workable without adding headcount. See how that applies specifically to accounting firms on the for accounting firms page.