18 Sep How to Prepare for Your First Audit: A Comprehensive Guide for New Malaysian Startups
Starting a new business in Malaysia, registered as a private limited company (Sdn. Bhd.), there is a crucial milestone on your horizon: your first company audit. It can be a smooth and valuable experience for your business with the right preparation.
The Role of a Qualified Auditor
First and foremost, one of the most important steps that you must not skip is appointing a qualified auditor. In Malaysia, an approved company auditor must meet several criteria:
- Be an approved member of the Malaysian Institute of Accountants (MIA)
- Present a valid certificate of academic qualification
- Hold an audit license approved by the Ministry of Finance
- Have relevant professional experience
Understanding Audit Requirements and Exemptions
The General Rule
In Malaysia, it is a legal requirement, under The Companies Act 2016, for every private limited company to have its accounts audited annually before lodging them with the Companies Commission of Malaysia (SSM).
Exception to the Rule
However, certain categories of private companies may be exempt from audit requirements. These typically include:
- Dormant companies
- Zero-revenue companies
- Threshold-qualified companies
The specific criteria for these exemptions are detailed and subject to change. If you believe your company might qualify for an exemption, it is crucial to consult with a qualified accountant or the SSM directly for the most up-to-date information.
Why Should Startups Prepare for an Audit?
Audits are not merely a compliance obligation; they are a vital instrument for fostering growth and enhancing credibility in startups. Here’s why audits are essential:
- Financial Health Check: Audits provide an objective assessment of your financial position, helping in informed decisions.
- Investor Confidence: Clean audit reports can attract potential investors by demonstrating financial transparency and reliability.
- Improved Financial Practices: The audit process often highlights areas for improvement in financial management.
- Legal Compliance: Staying compliant with Malaysian law protects your business from potential penalties and legal issues.
What Does an Auditor Do?
An auditor’s responsibility is to obtain assurance and clarity as to a company’s accounts and financial statements, and certify that these statements were prepared according to:
- Malaysia Private Entities Reporting Standard (MPERS) / Malaysia Financial Reporting Standards (MFRS) for private limited companies
- The Companies Act 2016.
4 Essential Steps for a Smooth Audit
Step 1: Understand the Audit Process
The audit typically unfolds in three main stages:
- Planning: The auditor outlines the nature, timing, and extent of the audit procedures.
- Fieldwork: This involves a detailed examination of financial records and processes.
- Reporting: The auditor presents findings and issues the audit report.
Understanding this process helps you prepare adequately for each stage and manage your team’s expectations.
The audit process typically involves several stages, including planning, fieldwork, and reporting. During this process, the auditor assesses the private limited company (Sdn. Bhd.) financial statements, internal controls, and compliance with relevant laws and regulations.
Step 2: Organise your Financial Records
Ensure all your financial documents are well-organised and up-to-date. This includes:
- Financial statements (Statement of financial position, Statement of Comprehensive Income, Trial Balance, General Ledger)
- Trade receivables and trade payables ageing report and ledger
- Monthly bank statements and bank reconciliation (including current account, term loan and other facilities)
- Receipts and invoices (Sales and purchase invoices, official receipt, and payment voucher)
- Monthly payroll records (Salary slip, EPF, SOCSO, EIS, PCB and HRDF contribution record)
- Tax returns (Form E, CP204, etc.)
Having these documents readily available will facilitate a smoother audit process.
Step 3: Review and Strengthen Internal Controls
Internal controls are your company’s financial safeguards. Review these controls to identify and address any weaknesses. Strong internal controls help prevent errors and fraud, making your financial statements more reliable. You may prepare the following:
- Conduct a self-assessment of the company’s current internal controls
- Identify and address any weaknesses in the financial processes
- Document the control procedures for easy reference during the audit
- Appoint a dedicated staff to coordinate with auditors and ensure all necessary information is readily available
Step 4: Establish Clear Communication with Your Auditors
Open and frequent communication with your auditors can significantly improve the audit experience:
- Schedule an initial meeting to discuss the audit’s scope, timeline, and any specific concerns
- Set up regular check-ins throughout the audit process
- Be prepared to provide additional information or clarifications promptly
- Ask questions if you are unsure about any part of the process
FAQs: Your First Audit
Q: What is an external audit?
A: External audit is a periodic or specific-purpose audit conducted by an external (independent) qualified accountant. Its objective is to determine, among other things, whether:
(a) the accounting records are accurate and complete
(b) prepared in accordance with the provisions of Malaysia Private Entities Reporting Standard (MPERS) / Malaysia Financial Reporting Standards (MFRS)
Q: How long does an audit typically take?
A: For most startups, the process can take 2-4 weeks, depending on the complexity of your finances and how well-prepared you are.
Q: How much does an audit cost?
A: Costs vary based on your business size and complexity. In Malaysia, startup audits typically range from RM1,000.
Q: Can I choose any auditor?
A: You have to choose a qualified company auditor who is 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.
Ready for Your First Audit? Let’s Make It Easy!
At KS Chia & Associates, we specialise in guiding startups through their first audit with ease and confidence. Our team of expert auditors is committed to making your audit experience smooth, informative, and valuable for your business growth.
Why Choose KS Chia & Associates?
- Startup Specialists: We understand the unique challenges faced by new businesses in Malaysia.
- Tailored Approach: Our services are customised to fit your specific business needs and goals.
- Educational Focus: We do not just audit; we help you understand your finances better.
- Ongoing Support: Our relationship does not end with the audit—we are here to support your financial journey.
Don’t let your first audit be a challenge. Contact KS Chia & Associates today, and let us turn this milestone into an opportunity for your startup’s success!
📞 Call us: +6 011 2366 5233
📧 Email: enquiry@kschia.com.my
🌐 Visit: https://kschia.com.my/
Remember, a well-prepared audit is not just about compliance—it is a stepping stone to your startup’s financial success and credibility in the Malaysian business landscape.
