Audit exemption: has a private limited company's compliance cost really come down?

Hook

Boss, the sentence heard most often these last two years is: "my private limited company does not have to do an audit any more." It sounds like good news — one audit fee gone, compliance cost down. But what happens next is something many bosses have run into: the company secretary says, well then let us prepare an unaudited set of accounts, at half price; and the tax agent says, if the statements are not prepared here, I cannot file for you. The money you saved seems to have gone straight back out. Today we take this from the top: what conditions count as exempt, what the exemption actually removes, who still has to do the rest, and which parts you can do yourself.

First separate them: what is exempt is the audit, not the books

The first and most expensive misunderstanding: audit exemption is not the same as no bookkeeping. What audit exemption removes is one thing only — the audit report signed by an external auditor. A whole row of things is not removed. The books are still kept — every entry recorded, everything reconciled (all twenty-odd lessons before this one). The financial statements are still prepared — properly, to the accounting standards. They still go to SSM — only what goes is an unaudited set, together with a declaration of which provision you are exempt under. The tax is still filed — Form C still goes in, and the CP204 estimate still goes in. The records are still retained — the retention period is the same and does not shorten because you are exempt. So the accurate way to put "no audit any more" is: one signature fewer, and nothing else has gone.

The conditions: the old three hundred thousand, and two out of three now

Now the conditions. There is a dividing line here that many people get wrong. The old rules — the Practice Directive SSM issued in 2017: the thresholds were very tight. Revenue of RM100,000, total assets of RM300,000, five employees or fewer, and they had to be met for several consecutive years. What does total assets of RM300,000 amount to? One vehicle and a small office and you are already at the ceiling. So in those years very few companies could actually use the exemption. The new rules — the ones issued at the end of 2024, applying to financial years beginning on or after 1 January 2025: the thresholds are relaxed substantially, and raised in stages: RM1 million in the first stage, RM2 million in the second, RM3 million in the third; the ceiling on employee numbers is relaxed alongside. The test becomes "two out of the three conditions met". The key is this sentence: what matters is when your financial year began. A company whose financial year ends in 2025 — but whose financial year started in April 2024 — is still on the old rules, still in the RM300,000 world. (The actual thresholds and years may be adjusted from year to year, and what governs is what SSM publishes for that year. Do not want to work it out? We built a free tool: put in the start date of the financial year and it decides which set applies — free.lttcfo.ai/auditexemption.)

That "unaudited set of accounts": what are you actually buying

Back to the sentence at the start: "we will prepare an unaudited set, at half price." Be clear about this first: that fee is reasonable. Because preparing a set of financial statements that complies with the standards is professional work in its own right: the accounts have to be classified correctly, the notes have to be written, the comparative figures have to tie, and related party transactions that require disclosure have to be disclosed. It is not printing out the trial balance. So what you should ask is not "why is there still a charge" but these three questions. One: whose books were these statements prepared from? If your books were a mess to begin with (the sort in the thirtieth lesson), the other side has to do detective work first and prepare the statements second — what you are paying is a puzzle-solving fee, not a preparation fee. Two: who does the books, who prepares the statements, who files the tax return? Those three things can be three people or one team. Priced separately, you can see which stretch is expensive. Three: will it be cheaper next year? If your books are complete all year and handed over monthly (the thirteenth lesson), the second year's statements ought to be faster and cheaper. If it costs the same every year, the problem is not the statements, it is the books.

Tax agents and the bundle: can I file it myself?

Then the sentence bosses find hardest to swallow: "if the statements are not prepared here, I cannot be your tax agent." Break it open and there are two different things inside. The first is professional, and it stands up. A tax agent signs his own name. He has to file off a set of books and statements he can trust; he cannot take figures of unknown provenance and put them in. That is not being difficult, that is responsibility. The second is commercial — selling "preparing the statements" and "being your tax agent" as a single bundle. That is his pricing choice, and you may accept it or not. So can you file it yourself? You can. The obligation to file always sat with the company. The company has its own MyTax login, and a director or an authorised person can submit Form C, and file the CP204 and CP204A revisions, themselves. Appointing a tax agent is delegating that job, not something the law requires you to do. But honestly: can you and should you are two different questions. Form C is not a matter of putting the profit into one box — there are tax adjustments in between: non-deductible expenses, capital allowances, losses brought forward from the previous year. Get them wrong and it is the company that is penalised. My advice: give the books and the statements to whoever does the bookkeeping (the seventh lesson: different jobs); the tax return you can do yourself or delegate — but ask for separate prices, so you know what each stretch is worth. (Incidentally, an old impression: people still ask about Form R. That was a form under the old system, and it went into history with the single-tier tax system — what is filed today is the Form C and CP204 line. What governs is LHDN's rules for the year in question.)

So has the cost come down or not?

Back to the question we opened with. One stretch has come down, not the whole line. What has come down: that one audit signature. What has not: bookkeeping, preparing the statements, lodging them, filing the tax. Those four were always there — they used to be hidden inside that one "audit fee" invoice, and now they have been spread out so you can see what each of them costs. So what actually brings the cost down is not the exemption, it is the state of the books: complete, handed over monthly, documents in place — and every stage afterwards is cheaper and faster. Messy books — and however wide the exemption, you are still paying a puzzle-solving fee. Audit exemption saves you one report; books kept well save you every year. Want to know which set of rules your company is on and whether you qualify? Run it through this free tool first: free.lttcfo.ai/auditexemption. Still not sure — then grab a coffee first and talk about your business. For the accounting, come to LTT. I am LTT, helping SME bosses get their accounts straight. Follow us, and see you next time.