Many have shared their opinion on Malaysia’s proposal to increase the audit exemption threshold. Here’s my perspective, perhaps from a more conceptual viewpoint:
Why do we need reporting? General Purpose Financial Statements (GPFS) aim to address information asymmetry faced by the primary users (investors/lenders, potential investors/lenders). The statutory assurance report provides credibility to these GPFS.
For closely-held companies, there may not be significant information asymmetry in the first place, eliminating the need for assurance. For small entities, their failure is unlikely to have a material effect on the economy.
I believe it’s a positive move. For companies, it means saving costs and resources that can be redirected towards growth, innovation, and strengthening their core operations.
For the profession, the exemption could be the most effective strategic move to mitigate talent scarcity, allowing more resources to be channeled towards auditing larger entities where the risk of financial misstatement may be higher, and the audit work more impactful.
For individual accountants, this change means more exposure to quality engagements where our knowledge truly matters.
Though small practices may have to merge or close, this isn’t necessarily a bad thing in the long term. Through market consolidation, pooling together resources and expertise, they can create more value for the business community they serve, further justifying our existence.
However, financial performance threshold and the proposed threshold amount may not be the most appropriate proxy to reflect the information needs of the GPFS users. Similarly, I call upon ACRA to revisit the current audit exemption threshold and filing requirements for private entities, for the benefits I mentioned above while continuing to meet the objective of statutory audits and public filings of GPFS.