Small and Medium Enterprises Association chairman William Ng said a proposal by the Companies Commission of Malaysia to raise the exemption threshold would save micro and small enterprises considerable time and costs and promote greater efficiency at all levels of the economy.

The proposal is to allow audit exemption to companies with revenue or assets of up to RM3 million or a headcount of 30.

Ng said: “In almost all micro and small enterprises, the directors and shareholders are the same, so it serves no purpose to mandate auditing.”

The current rules provide exemption for dormant companies and those with revenue below RM100,000, assets below RM300,000 and with five or fewer employees.

“This is miniscule, compared to Singapore, where companies with revenue and assets less than S$10 million are exempted from compulsory audit,” Ng said in a statement.

“In Australia, the threshold is even higher, where small and medium-sized enterprises (SMEs) with revenue and assets less than A$50 million and A$25 million respectively are exempted from audit.”

Ng said the proposed exemption would provide companies with the freedom to decide based on their business requirements.

“For example, a company may only decide to have an audit performed if they are applying for a government grant or to obtain a bank loan,” he added.

The commission recently published a consultative document to propose the new audit exemption criteria for private companies and is seeking public feedback by March 8.

Based on the proposal, any company meeting any two of the three criteria would no longer be required to hire an external auditor to audit their accounts, but will still be required to prepare financial statements for taxation and financial planning purposes.