Auditing is the formal process of reviewing a company’s financial records, operations, and transactions to ensure accuracy, transparency, and regulatory compliance. In Malaysia, Section 267 of the Companies Act 2016 mandates that all private limited companies (Sdn Bhd) must appoint a qualified auditor for each financial year—unless officially exempted by the Registrar of Companies.
At Paul Hype Page Malaysia, our licensed auditors deliver more than just compliance. We conduct independent, in-depth financial assessments to identify risks, enhance internal controls, and offer practical recommendations for operational improvement. Our audit services help businesses in Malaysia maintain credibility, meet statutory obligations, and build investor trust.
Why is auditing important?
Auditing plays a critical role in ensuring the accuracy and integrity of financial records, while reinforcing transparency and stakeholder confidence. In Malaysia, statutory audits are mandated by the Companies Act 2016, making them a legal requirement for most private limited companies.
Beyond regulatory compliance, a well-conducted audit provides valuable insights into a company’s financial health, internal controls, and potential operational risks. This information is essential for informed decision-making, strategic planning, and risk mitigation. For foreign investors and multinational businesses entering Malaysia, audits enhance credibility, build investor trust, and ensure alignment with local financial reporting standards, paving the way for sustainable growth in the Malaysian market.
Related Read: Annual Reporting for a Private Limited Company (Sdn. Bhd.) in Malaysia
What are the Legal Requirements of Auditing in Malaysia?
Legal Requirements of Auditing in Malaysia
Under the Companies Act 2016, it is mandatory for most companies in Malaysia to conduct a statutory audit every financial year to ensure that their financial statements are accurate and compliant with national standards. This legal obligation applies to all private limited companies (Sdn Bhd) and public companies, with only limited exemptions available.
Audit Exemptions in Malaysia
Companies that may qualify for audit exemption include:
- Dormant Companies: No significant accounting transactions during the financial year.
- Small Companies: Must meet at least two of the following criteria for two consecutive financial years:
- Annual revenue does not exceed RM300,000
- Total assets do not exceed RM500,000
- No more than 5 employees
Who Can Conduct Audits?
Audits must be performed by approved auditors registered with the Audit Oversight Board (AOB) under the Securities Commission Malaysia. These professionals ensure compliance with either the Malaysian Financial Reporting Standards (MFRS) or Malaysian Private Entities Reporting Standards (MPERS), depending on the entity’s classification.
Why Compliance Matters
Failing to comply with Malaysia’s audit requirements can lead to:
- Monetary penalties
- Potential legal actions
- Loss of business credibility
Ensuring timely, accurate, and compliant audits not only satisfies legal obligations but also enhances stakeholder confidence, supports investment readiness, and strengthens your company’s financial governance in Malaysia.
Our Malaysia Auditing Services
We specialize in providing comprehensive auditing services in Malaysia, ensuring your financial records are thoroughly examined and comply with statutory requirements. Our expertise ensures accurate reporting and transparency, giving stakeholders confidence in your business’s financial integrity. Additionally, we offer strategic insights to enhance governance and support sustainable growth.
What are the Compliance Standards of Auditing in Malaysia?
In Malaysia, auditing is not just a regulatory requirement — it is a critical pillar of financial integrity. Malaysian companies must adhere to strict audit compliance standards to maintain transparency, accountability, and trust with regulators, investors, and the public. Whether you’re a startup or a multinational corporation operating in Malaysia, understanding these standards ensures your business stays legally compliant and financially healthy.
Malaysian Approved Standards on Auditing (ISA)
Audits conducted in Malaysia must follow the Malaysian Approved Standards on Auditing, which align with the International Standards on Auditing (ISA). These standards ensure that auditors follow globally accepted procedures when reviewing financial statements.
For businesses in Malaysia, ISA compliance means:
- Financial audits are conducted with consistency and objectivity
- Reports offer a fair and true representation of financial performance
- Stakeholders gain confidence in the company’s internal controls and disclosures
Financial Reporting Standards
Malaysia uses two primary financial reporting frameworks:
- Malaysian Financial Reporting Standards (MFRS): For public-listed companies and larger entities
- Malaysian Private Entities Reporting Standards (MPERS): For small to medium private companies
These frameworks support:
- Uniformity and transparency in corporate reporting
- Comparability across industries and jurisdictions
- Credible reporting that enables informed investment and policy decision
Compliance with the Companies Act 2016
The Companies Act 2016 governs how businesses in Malaysia must handle financial recordkeeping and disclosures. Auditors must verify:
- Proper accounting records are maintained
- Financial statements are submitted within the legal timeframe
- All statutory elements (e.g., Director’s Report, Profit & Loss, Balance Sheet) are included
Non-compliance could result in financial penalties, suspension of licenses, or director liabilities. Maintaining compliance also simplifies future business expansions and financing.
Regulatory Oversight by the Audit Oversight Board (AOB)
In Malaysia, audit quality is regulated by the Audit Oversight Board (AOB) under the Securities Commission. Audit firms must be registered with the AOB if they serve public interest entities (PIEs).
The AOB ensures:
- Audit engagements maintain high professional standards
- Regular inspections and reviews are performed
- Auditors remain independent and technically proficient
This strengthens audit reliability across Malaysia’s capital markets.
Tax Compliance
Auditors also help verify that your company complies with Malaysian tax laws as outlined by the Inland Revenue Board (LHDN).
Their role includes:
- Verifying tax deductions, exemptions, and submissions are accurate
- Ensuring documentation meets statutory tax filing requirements
- Helping you avoid unnecessary fines or audits from LHDN
Proper tax compliance contributes to financial health and investor confidence.
Ethics and Independence
Professional auditors in Malaysia must comply with the Malaysian Code of Ethics for Professional Accountants, ensuring:
- Integrity in judgment and communication
- Objectivity free from conflicts of interest
- Confidentiality in handling sensitive company information
They must also maintain independence from the company being audited, especially in opinion issuance, to preserve impartiality and trust.
Audit Exemptions in Malaysia: Do You Qualify?
In Malaysia, private limited companies (Sdn Bhd) are generally required under the Companies Act 2016 to appoint an auditor for each financial year. However, in line with efforts to ease regulatory burdens on micro and dormant businesses, the Companies Commission of Malaysia (SSM) issued Practice Directive 3/2017, which allows certain companies to be exempted from statutory audits.
Understanding whether your company qualifies for this exemption can help reduce compliance costs while ensuring you remain legally aligned with Malaysia’s corporate governance standards.
| Dormant Companies | Zero-Revenue Companies | Threshold-Qualified Companies |
|---|---|---|
A dormant company in Malaysia is defined as one that has had no accounting transactions during a specific period — aside from activities related to:
To qualify for audit exemption, the company must meet either of the following:
This exemption is commonly applied to holding companies, investment vehicles, or inactive businesses awaiting future plans. |
A zero-revenue company in Malaysia may qualify for audit exemption if all three of the following conditions are met:
Note: Revenue does not include:
This category benefits small-scale entities or companies that have paused operations temporarily due to market conditions or restructuring. |
Companies in Malaysia may also qualify under the threshold-qualified exemption — designed for micro-sized businesses. The company must meet all of the following for the current and past two financial years:
This exemption helps small Malaysian startups and SMEs that operate with lean structures and minimal financial activity. |
6 Reasons Why You Should Conduct a Company Audit
Conducting a company audit, even if you are exempted, offers numerous advantages that should not be overlooked. When you engage an audit firm in Malaysia, you can expect the following six benefits.
Our 2 Decades of Proven Expertise Will Guide Your Business
With over 20 years of experience across Singapore, Malaysia, Indonesia, and Hong Kong, we’ve successfully incorporated more than 2,000 companies in various jurisdictions.
In Singapore, our high success rate in securing work passes and handling complex regulations reflects our commitment to client success
As trusted advisors, we use strategic networks and market insights to streamline the Singapore company registration process—helping businesses build a strong foundation in a competitive environment.
Frequently Asked Questions
Extend your understanding about audit in Malaysia and the services that audit firms provide with these top questions that we get asked most.
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