Malaysia Audit Services

Auditing is a systematic examination and verification of a company’s financial records, transactions, and operations to ensure the financial statements present a true and fair view of the company’s financial position. Section 267 of the Companies Act 2016 makes it a requirement for private companies to appoint auditors for each financial year, unless exemption has been given by the Registrar. With our expertise, we ensure compliance with regulations, independent assessments of financial statements, identify risks and offer recommendations for process improvement.

In Malaysia, the Companies Act 2016 mandates that most companies undergo an annual statutory audit to ensure their financial statements comply with regulatory standards. This requirement applies to all private limited companies (Sdn Bhd) and public companies, except for those eligible for exemptions. Companies exempt from audits typically include:

• Dormant companies: Entities that have no significant accounting transactions during the financial year.
• Small companies: Private entities meeting specific criteria, such as annual revenue not exceeding RM300,000 for two consecutive years, total assets not exceeding RM500,000, and no more than five employees.

Audits must be conducted by qualified auditors registered with the Audit Oversight Board (AOB) under the Securities Commission of Malaysia. These auditors ensure that financial statements adhere to the Malaysian Financial Reporting Standards (MFRS) or the Malaysian Private Entities Reporting Standards (MPERS), depending on the size and nature of the business.

Non-compliance with auditing requirements can result in penalties, legal action, and reputational damage. Ensuring timely and accurate audits not only fulfills legal obligations but also promotes transparency and trust among stakeholders.

Auditing plays a vital role in ensuring the transparency, accuracy, and reliability of a company’s financial statements. In Malaysia, the auditing landscape is governed by robust compliance standards designed to uphold financial integrity and align businesses with regulatory requirements. These standards, including the Malaysian Approved Standards on Auditing and the Companies Act 2016, provide a framework for maintaining accountability while fostering trust among stakeholders. Whether ensuring adherence to financial reporting standards or verifying tax compliance, audits are essential for businesses to navigate Malaysia’s regulatory environment successfully. This guide outlines the key compliance standards that entrepreneurs and business owners must understand to maintain sound financial practices and build confidence with stakeholders.

Audits in Malaysia must adhere to the Malaysian Approved Standards on Auditing, which are based on the International Standards on Auditing (ISA). These globally recognized standards ensure that audits are conducted systematically and reliably. Auditors assess financial records for accuracy and completeness, ensuring they present a fair view of the company’s financial position. By aligning with ISA, audits provide stakeholders with confidence in the integrity of financial statements, fostering trust and accountability.

Businesses in Malaysia are required to prepare their financial statements in accordance with specific reporting standards:

• Malaysian Financial Reporting Standards (MFRS): Applicable to entities that require comprehensive reporting, such as publicly listed companies and larger enterprises.
• Malaysian Private Entities Reporting Standards (MPERS): Tailored for private entities meeting size and operational criteria, simplifying reporting while maintaining compliance.
  These standards ensure consistency and comparability in financial reporting across industries, allowing stakeholders to make informed decisions based on reliable financial data.

The Companies Act 2016 sets the legal framework for financial record-keeping, disclosure, and reporting in Malaysia. Auditors must verify that a company’s financial statements comply with the Act’s requirements. This includes checking that:

• Proper accounting records are maintained.
• Annual financial statements are prepared and submitted on time.
• Mandatory disclosures, such as director’s reports and profit/loss statements, are included.
  Compliance with the Companies Act ensures businesses meet statutory obligations and avoid legal penalties.

The Audit Oversight Board (AOB) under the Securities Commission of Malaysia monitors and regulates auditors of public-interest entities. Audit firms must be registered with the AOB to ensure they maintain high-quality standards. The AOB conducts inspections and reviews to:

• Verify adherence to auditing standards.
• Evaluate the quality of audit engagements.
• Identify areas for improvement in auditing practices.
  This oversight ensures that auditors remain independent and capable of delivering high-quality services that protect public interests.

Auditors also play a crucial role in ensuring compliance with Malaysian tax laws, regulated by the Inland Revenue Board of Malaysia (LHDN). They review tax-related transactions, filings, and documentation to confirm that:

• Taxes are calculated accurately.
• All allowable deductions and exemptions are applied correctly.
• Tax submissions are made within prescribed deadlines.
  By ensuring tax compliance, auditors help businesses avoid penalties, legal complications, and financial discrepancies.

Adherence to the Code of Ethics for Professional Accountants is essential for auditors in Malaysia. The Code emphasizes:

• Integrity: Ensuring honesty in all professional actions.
• Objectivity: Avoiding bias or conflicts of interest.
• Professional Competence: Maintaining and applying up-to-date knowledge and skills.
  Auditors must also maintain independence from the companies they audit, ensuring impartiality and credibility in their assessments. This ethical framework protects the audit process’s integrity, building stakeholder trust.

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.