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Understanding Unaudited Financial Statements in Malaysia: Key Differences and Audit Exemption Rules

3 November 2025

In Malaysia, all companies are required to prepare financial statements every year to reflect their financial performance and position. However, not all companies are required to have their financial statements audited. Depending on the company’s size and eligibility, some can submit unaudited financial statements under the audit exemption framework introduced by the Companies Commission of Malaysia (SSM).

What Is an Unaudited Financial Statement?

An unaudited financial statement refers to financial reports—such as the statement of financial position (balance sheet), statement of profit or loss, and statement of cash flows—that are not reviewed or verified by an external auditor.

These reports are usually prepared internally by the company’s management or accountants. While they provide useful insight into a company’s performance, they do not carry an auditor’s assurance that the information is accurate, complete, or compliant with applicable accounting standards.

Unaudited financial statements are often used for:

Internal management reporting
Budgeting and forecasting
Preliminary review before the audit process
Submission to SSM for companies that qualify for audit exemption

Audited vs. Unaudited Financial Statements: What’s the Difference?

The main difference between an audited and an unaudited financial statement lies in independent verification and credibility.

Aspect	Audited Financial Statement	Unaudited Financial Statement
Verification	Reviewed and verified by a licensed external auditor	Prepared internally without external verification
Reliability	High – includes independent auditor’s opinion	Moderate – relies on management’s own records
Purpose	Required for statutory filing and external stakeholders (banks, investors, authorities)	Used mainly for internal or preliminary purposes
Cost & Duration	Higher cost and longer time to complete	Lower cost and faster turnaround
Compliance	Must comply with Malaysian Approved Standards on Auditing (MASA)	Not subject to audit standards

While audited financial statements offer greater assurance to shareholders, banks, and potential investors, unaudited statements are often sufficient for smaller, privately held companies that meet the exemption criteria.

Audit Exemption in Malaysia: Who Qualifies?

Under the Companies Act 2016 and SSM’s Practice Directive No. 3/2017, certain categories of private companies (Sdn. Bhd.) are eligible for audit exemption if they meet specific criteria.

Previous exemption criteria (Criteria under Practice Directive will remain in force until 31 December 2024):

Categories	Qualifying Criteria
Dormant Companies	Companies that have no accounting transaction during the financial year may be exempted from audit, provided it remains dormant throughout the period
Zero-Revenue Companies	A company that has: No revenue during the current and preceding financial years; and Total asset not exceeding RM300,000 for both years
Threshold-Qualified Companies	A company that meets all the following conditions for both the current and previous financial years: Revenue ≤ RM100,000 Total assets ≤ RM300,000 Not more than 5 employees at the end of each financial year

New Qualifying Criteria

Year	2025 (Phase 1)	2026 (Phase 2)	2027 (Phase 3)
Financial Period	Commencing from 1^st January until 31^st December 2025	Commencing from 1^st January until 31^st December 2026	Commencing from 1^st January 2027 onwards
Financial Statement Submission Year:	Beginning from 1^st January 2026	Beginning from 1^st January 2027	Beginning from 1^st January 2028
Thresholds:
Turnover	RM1,000,000	RM2,000,000	RM3,000,000
Assets	RM1,000,000	RM2,000,000	RM3,000,000
No. of Employees	10	20	30

Kindly refer here for the Malaysia’s New audit exemption qualifying criteria.
The new qualifying criteria is applicable for financial statements with annual periods commencing on or after 1 January 2025.

Benefits of Unaudited Financial Statements

Opting for unaudited financial statements can offer several advantages for small or dormant entities:

Cost savings: Avoiding annual audit fees reduces financial burden on micro and small businesses.
Faster turnaround: Unaudited reports can be prepared and finalized more quickly.
Simplified compliance: Less documentation and fewer audit procedures.
Focus on operations: Management can prioritize business growth rather than administrative requirements.

However, it is essential to ensure that the unaudited financial statements are still accurate, complete, and properly maintained. SSM may still require supporting documentation for verification purposes if needed.

When an Audited Financial Statement Is Still Needed

Even if your company qualifies for audit exemption, you may still need an audited financial statement in certain circumstances, such as:

Applying for bank loans or financing
Attracting investors or partners who require audited assurance
Tendering or government submissions that specify audited accounts
Group consolidation purposes within a holding company structure

In these cases, an audit provides added credibility and assurance that the company’s financial information is reliable.

Conclusion

Understanding the difference between audited and unaudited financial statements is essential for business owners to ensure proper compliance and cost-effective financial management.

If your company qualifies for audit exemption in Malaysia, preparing unaudited financial statements can save time and cost while remaining compliant with SSM requirements. However, financial records must still be properly prepared in accordance with the Malaysian Private Entities Reporting Standard (MPERS) or relevant accounting standards.

For professional guidance on audit exemption eligibility, unaudited financial statement preparation, or statutory compliance, our team at Ecovis Malaysia is ready to assist.