ACCA calls for phased approach to increase in audit exemption threshold

PETALING JAYA: The Association of Chartered Certified Accountants (ACCA) has called for a phased approach to a proposed increase in the audit exemption threshold which would remove the requirement for companies with annual revenues of less than RM3 million to be independently audited.

In its response to the latest consultation on the issue by the Companies Commission of Malaysia (SSM), ACCA said the expected surge in SMEs not subject to independent audits may have profound and enduring implications for the trustworthiness and integrity of the corporate sector, including supply chains, and the resilience of the broader economy.

ACCA does, however, agree with the SSM’s view that it’s crucial to strike a balance between providing cost relief to smaller businesses and ensuring adequate oversight on financial reporting.

It is suggesting a phased approach to the increase to RM3 million from the current level of RM100,000 over five years, starting with thresholds of RM500,000.

ACCA Maritime Southeast Asia Portfolio head Andrew Lim said, “A phased approach will allow stakeholders more time and space to adjust to and respond to shifting market forces.” He also warned about incorrect perceptions on the value of audit.

“We’re concerned that the conduct of independent audits has been conflated with administrative burdens. The SSM and other regulators need to highlight the importance and benefits of audits to both companies themselves and those that they deal with, such as banks, tax authorities or major creditors,” Lim added.

It is also concerned that an abrupt and significant increase in audit exemption thresholds might diminish the attractiveness of the accountancy profession, especially for young talent.

ACCA also highlighted the short timeline for the consultation which it says has reduced its time to consult with members and other stakeholders.

“With an abrupt and significant increase, there would be a significant risk of unintended consequences. We hope the SSM will extend the consultation period and engage with everyone who is affected by the proposed changes so that they have a chance to share their views,’ Lim remarked.