Incorporation of company in Malaysia isn’t just about turning a profit — it’s also about staying on the right side of the law. One crucial area many companies tend to overlook until it’s too late is audit compliance. It may sound like a technical or even intimidating term, but simply, it means making sure your business’s financial records are in order and that you’re following government regulations.
Whether running a small enterprise or a multinational company, audit compliance in Malaysia is not just a legal obligation — it builds trust, improves efficiency, and protects your business in the long run. If you’re not sure where to begin, don’t worry.
This article explores the importance of audit compliance for companies in Malaysia, highlighting the key benefits of conducting thorough audits and the valuable role audits play for stakeholders. By adopting proper audit practices, businesses in Malaysia can boost their credibility, reduce financial and operational risks, and support long-term growth in a competitive and evolving market.
What is Audit Compliance?
Audit compliance means that your business follows all the necessary audit rules and laws. In Malaysia, it usually refers to:
- Keeping proper financial records.
- Having your financial statements audited annually.
- Filing the proper documents with the Companies Commission of Malaysia (SSM) and the Inland Revenue Board (LHDN).
Being compliant ensures your company is transparent, accountable, and legally sound.
Why Audit Compliance Matters in Malaysia?
Malaysia has strict laws under the Companies Act 2016 and guidelines set by the Malaysian Institute of Accountants (MIA). Companies must comply with these to avoid penalties and even criminal charges. For more official guidance, visit the SSM Malaysia website.
Here’s why it matters:
What Are the Mandatory Audit Requirements for Companies in Malaysia?
Under the Companies Act 2016, all companies incorporated in Malaysia—locally or foreign-owned—must have their financial statements audited annually by an auditor approved by the Ministry of Finance. This ensures the accuracy and integrity of financial records, supporting legal compliance and business credibility.
Companies are required to:
- Keep proper and up-to-date accounting records
- Prepare annual financial statements in line with MFRS or MPERS, depending on the company type
- Submit audited financial statements annually:
- Private companies – within 6 months of the financial year-end
- Public companies – within 30 days of the Annual General Meeting (AGM)
What are the Types of Audit Compliance in Malaysia?
Here are the main types of audit compliance businesses must handle:
Who Needs to Be Audited in Malaysia?
Most businesses in Malaysia must audit their accounts yearly. These include:
- All private limited companies (Sdn Bhd).
- Companies with annual revenue above RM100,000 (subject to exemption conditions).
- Foreign-owned businesses.
However, small companies meeting certain conditions may be eligible for audit exemption. You can read more about audit exemptions in the SSM Audit Exemption Guide.
Who Qualifies for Audit Exemption in Malaysia?
All private companies that rely on audit exemption must reassess their eligibility based on the updated conditions. Companies previously eligible may need to review their financial metrics, while others may newly qualify.
New Criteria (From 2025 Onward)
The Companies Commission of Malaysia proposed new criteria for audit exemption in early 2024. The new criteria have been implemented since January 1, 2025. A private company qualifies for audit exemption if it meets at least two out of the three conditions below, for three consecutive years:
What are the Benefits of Audit compliance in Malaysia?
Being audit compliant is more than just ticking a box for the authorities — it brings tangible advantages that contribute to a company’s long-term stability, growth, and credibility. Both businesses and their stakeholders stand to gain significantly from a strong audit framework.The advantages to companies and stakeholders are outlined below.
Benefits of Audit Compliance for Companies in Malaysia
Audit compliance is not just a regulatory burden but offers many advantages to companies in Malaysia. Here’s a concise overview of the key benefits:
- Ensures Financial Accuracy and Reliability
Audit compliance helps businesses confirm that their financial statements are accurate, complete, and aligned with approved accounting standards. This ensures that management clearly understands the company’s financial position and performance.
- Improves Internal Processes and Risk Management
Audits often reveal gaps in internal systems and procedures. Addressing these findings leads to stronger controls, better oversight, and reduced financial and operational risks exposure.
- Boosts Organisational Efficiency
Audit findings often include practical recommendations for improving operational efficiency. By acting on these insights, companies can streamline processes, reduce waste, and enhance profitability.
- Facilitates Funding and Expansion
Lenders and investors typically request audited accounts before committing funds. A clean audit report can improve a company’s creditworthiness and make securing loans, grants, or equity investment easier.
- Benefits of Audit Compliance for Stakeholders in Malaysia
Audit compliance does not just benefit the companies themselves. There is reciprocal value for stakeholders of all types, including investors, customers, suppliers, and creditors. Here’s a concise overview of the key benefits for stakeholders in Malaysia:
- Inspires Investor and Shareholder Confidence
Stakeholders want assurance that their interests are protected. An independent audit lends credibility to the company’s financial statements, signalling that the business is well-managed and transparent.
- Protects the Interests of Creditors and Suppliers
Banks and suppliers rely on financial information to assess risk before offering credit or extended payment terms. Audit compliance assures them that the business is financially sound and reliable.
- Strengthens Customer and Public Trust
In sectors where corporate ethics and transparency matter to the public, regular audits prove that the company is accountable and committed to doing business responsibly.
- Supports Employee Assurance and Morale
Employees are more likely to feel secure and motivated when they know their employer is financially stable and well-governed. Audit compliance indicates that a company is serious about sustainability and long-term growth.
- Encourages Responsible Governance
Directors and board members are ultimately accountable to the company’s stakeholders. Audits ensure that these leaders are fulfilling their fiduciary duties properly and managing the organisation in the stakeholders’ best interests.
Related read: Audit Exemption 2025: What Private Companies In Malaysia Need To Know
What Happens If You Don’t Comply with the Audit Requirements in Malaysia?
Avoiding audit compliance isn’t just risky — it can cost your business dearly. Non-compliance can lead to serious consequences:
Conclusion
Audit compliance is the foundation of effective corporate governance and sustainable business growth in Malaysia. Audit compliance isn’t just paperwork — it’s peace of mind. It ensures your business runs smoothly, avoids legal trouble, and earns the trust of clients, banks, and authorities. With constantly changing rules and strict regulations in Malaysia, it’s not something you should take lightly.
Whether you’re just starting or managing a growing enterprise, 3E Accounting Malaysia is here to help you stay compliant easily. Our experienced professionals handle everything, so you can focus on growing your business, knowing your finances are in good hands.
Don’t wait for penalties or audit letters to arrive — act now.
Contact 3E Accounting Malaysia today for professional audit compliance services you can trust.
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Frequently Asked Questions
Yes, most companies in Malaysia must appoint an approved company auditor within 30 days of incorporation unless they fall under the audit exemption category. Even exempted companies still need to submit unaudited financial statements.
Audit exemption is automatically granted if a company meets the eligibility criteria. No formal application is required, but the company must file unaudited financial statements with SSM.
Hiring professional audit firms ensures your financial statements are accurate, meet statutory requirements, and provide credibility to banks, investors, and stakeholders. Audit companies in Malaysia also help businesses avoid legal penalties and improve internal controls.
You can find a list of licensed audit companies and auditors in Malaysia through the Malaysian Institute of Accountants (MIA) directory at www.mia.org.my.
Every company is required to appoint an auditor at any time before the first annual general meeting. It is the directors’ responsibility to appoint auditors and this can be made by either a circular resolution of the board or at a board meeting.
The auditor’s term is until the conclusion of the annual general meeting (AGM). If directors have not appointed an auditor, the shareholders may appoint the auditors at a general meeting.
Abigail Yu
Author
Abigail Yu oversees executive leadership at 3E Accounting Group, leading operations, IT solutions, public relations, and digital marketing to drive business success. She holds an honors degree in Communication and New Media from the National University of Singapore and is highly skilled in crisis management, financial communication, and corporate communications.
