It is a requirement under the Companies Act of Malaysia that every private limited company doing business in Kuala Lumpur (KL) or any parts of Malaysia must appoint an approved company auditor for auditing its accounts and reporting to the members of the company annually. In other words, annual audit in Malaysia is mandatory for every private limited company doing business in Kuala Lumpur (KL) or any parts of Malaysia, regardless of the size of the company.
A business registered as a sole proprietor or partnership doing business in Malaysia is not required by law to have its financial statements audited annually.
AN APPROVED COMPANY AUDITOR IN MALAYSIA
The laws in Malaysia also require that a company's annual audit must be performed by an approved company auditor. An approved auditor in Malaysia is a person approved by the Ministry of Finance.
The Ministry may, if he is satisfied that the person is of good character and competent to perform his duties as a company auditor, approve the person as company auditor in Malaysia. The Ministry will grant an audit license for approved auditors in Malaysia, which is renewable every 2 years.
The applicant to be an approved company auditor in Malaysia is required to be a member of Malaysian Institute of Accountants (MIA), obtained with recognized academic or professional qualification and has relevant professional practical experience.
The approved company auditor auditing the company doing business in Kuala Lumpur (KL) or any parts of Malaysia must also be external or independent. Such auditors are called external because they are not employed by the entity being audited.
A partnership firm of auditors in Malaysia may be appointed as auditors in the firm's name. In practice, most of the appointments of auditors in Malaysia are in the name of the audit firm. Every partner of the audit firm in Malaysia must individually be an approved company auditor.
WHAT IS AN AUDIT?
An audit in Malaysia involves performing procedures in order to obtain audit evidence about the amounts and disclosures in the financial statements. In the audit of financial statements, the objective is to enable the auditor "to express an opinion whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework".
In Malaysia, the financial statements are required to be prepared in accordance with the Private Entity Reporting Standards for private limited companies and the Companies Act 1965.
WHAT IS THE DISTINCTION BETWEEN ACCOUNTING AND AUDITING?
Many people in Malaysia are confused between what is auditing and accounting. We should be clear however that an audit differs significantly from accounting.
Accounting is a process that creates financial statements and other financial information that is useful for the management. The Companies Act provides that the directors of the companies are ultimately responsible for the preparation and fair presentation of the financial statements.
An audit does not create accounting information but involves examining accounting information. An audit of financial information enhances the credibility and reliability of financial information and statements. Reliable information is necessary for users of the financial information such as investors, creditors and financial institutions.
Therefore, an auditor must be independent as one of the objectives of an audit is to provide objective and independent report on the reliability of information. Users of financial statements can have reasonable assurance that audited financial reports in Malaysia are free from material misstatements or omissions.
Our partners in YYC advisors are licensed auditors in Malaysia and we provide all types of audit engagement services to clients based in Kuala Lumpur (KL) as well as through out the country. If you would like to find out how we can assist you please click this link and contact us. We are more than happy to help!
More about Audit in Malaysia:
Appointment of Auditor in Malaysia
Duties of Auditors in Malaysia