Tips For Auditing Your Malaysian Company For The First Time
Do you own a startup company in Malaysia and wish to have this company registered as a private limited company?
If you do, it is worth knowing that it is mandatory and a core requirement under the Companies Act of Malaysia for every private limited company carrying out commercial activities in the country to appoint a qualified and registered independent auditor, audit firm in Malaysia, or accounting firm Malaysia, for auditing the company’s account annually and reporting to the company.
An audit in Malaysia involves procedures in order to obtain assurance and clarity as to a Malaysia company’s accounts and financial statements, and certifying that these statements were prepared according to the statutes of Malaysia Private Entities Reporting Standard / Malaysia Financial Reporting Standards for private limited companies and the Companies Act 2016.
Auditing is essential and compulsory for every private limited company in Malaysia regardless of the size or age of the company. In other words, whether or not you’re just starting out your company, if indeed you are seeking to have your company registered as a private limited company in Malaysia, you must ensure that you have an auditor in your service to qualify you to have a Malaysia company registration.
And before appointing an auditor, ensure the financial statements of your company are in accordance with the statutes of Malaysia Private Entities Reporting Standard / Malaysia Financial Reporting Standards for private limited companies and the Companies Act 2016.
1. How do you get a qualified or approved auditor?
The Companies Act of Malaysia stipulates that the annual audit of your private limited company must be done by an approved company auditor, audit firm or accounting firm in Malaysia. An approved company auditor is an auditor certified by the Malaysian Ministry of Finance. Whoever you appoint to audit your companies account must be approved and certified by this Ministry and if not, your audit will not be valid.
Any applicant wishing to be your company’s auditor must be an approved member of the Malaysian Institute of Accountants (MIA) and must be able to present a valid certificate of academic qualification, as well as an audit licence approved by the Ministry of finance, and must have relevant professional experience.
Note that whoever you appoint as your company auditor must be external or independent, and not an employee in your company’s payroll. An audit firm or an accounting firm in Malaysia may be appointed as auditors in the firm’s name.
2. What to expect from the auditor's report
The auditor’s report following the financial statements issued in a company’s yearly report gives the guarantee to users of the financial statements that these statements are free from errors. In Malaysia, the MIA stipulates that audits must be performed in accordance with the approved auditing standards to ensure quality of work.
Whatever the auditor encounters while auditing the financial statements must be documented as required by the standard on Audit Working Papers, but these documentation used to be kept secret from the users of audit reports. What users get is simply a conclusion or opinion of the auditor. But this practice changed when MIA introduced ISA 701, Communication of Key Audit Matters (KAM) into the auditor’s report for listed issuers.
The auditor’s report is now required to include an additional paragraph at the bottom, disclosing salient issues of the greatest significance during the audit process. This will enlighten the users involved in the critical areas of the audit, as well as why and how the auditor arrived at his/her conclusion.
Even at that, the public still clamors for the audit process to be more transparent.
All in all, ever since MIA issued ISA 701 in 2016, it has been a new dawn in Malaysia auditing process. Information that was hitherto privy to only the auditor and his or her client, is now required by law to be included at the end of the auditor’s report. This information is regarded as the most critical or significant point of the auditing process, and such information must be disclosed to you, being in charge of the company.
For more information, feel free to get in touch with us.
