Audit

Legal Obligations under the Companies Act 2016

The Companies Act 2016 (Act 777) requires most companies in Malaysia to appoint a licensed auditor annually and to ensure their financial statements are independently reviewed. The Act also outlines exemptions for qualifying private companies and imposes strict obligations on directors and officers.

A. Applicability & Appointment

Requirement	Details	Legal Reference
Audit Requirement	Private companies must appoint an auditor for each financial year unless exempted	Section 267(1), Companies Act 2016
Auditor Appointment Timeline	Auditor must be appointed within 30 days of incorporation (for new companies)	Section 267(3)(a)
Appointment by Members (if board fails)	Members must appoint an auditor by ordinary resolution if the board does not	Section 267(4)

B. Audit Exemption

Exemption Criteria	Details	Legal Basis
Dormant Company	No accounting transaction throughout the financial year	Practice Directive 3/2017, Para 4.1(a)
Zero-Revenue Company	No revenue and total assets ≤ RM300k for 2 consecutive years	Practice Directive 3/2017, Para 4.1(b)
Threshold-Qualified Private Company	Revenue ≤ RM100k, total assets ≤ RM300k, and ≤ 5 employees for 2 consecutive years	Practice Directive 3/2017, Para 4.1(c)

C. Auditor’s Powers & Duties

Obligation / Right	Details	Legal Reference
Duty to Report	Auditor must state if the financial statements give a true and fair view	Section 266(2)
Right to Access Records	Auditor may access all accounting and other relevant records at all times	Section 266(4)
Right to Require Information	Auditor may require officers to provide information or explanations	Section 266(4)
Duty to Report Offences	If fraud or serious irregularities are discovered, the auditor must report to the Registrar	Section 266(10)

D. Non-Compliance & Offences

Offence	Details	Penalty
Obstructing Auditor	Refusing access or failing to provide information	Section 266(12) – Fine up to RM500,000 or 3 years imprisonment (or both)

How This Affects Your Business

For most companies, an annual audit isn’t optional—it’s a legal requirement. But even when exemptions apply, directors are still responsible for ensuring compliance with financial reporting and corporate governance standards.

Businesses commonly face:

Confusion around audit exemption eligibility, especially as thresholds shift,
Difficulty preparing complete, audit-ready records in time,
Missed auditor appointment deadlines (especially for newly incorporated companies),
Tension during the audit process due to poor documentation or communication,
Potential liability if directors obstruct or delay the auditor’s work.

How We Can Help

Whether you’re appointing an auditor for the first time or considering exemption, we ensure you’re informed, compliant, and ready.

Our audit support services include:

Audit Exemption Assessment
We evaluate your company’s eligibility under Practice Directive 3/2017 and manage exemption declarations where applicable.
Audit Readiness Review
We ensure your accounts, documentation, and financial statements meet auditor expectations and statutory formats.
Licensed Auditor Coordination
We liaise with our network of MOF-approved auditors, ensuring proper appointment and clear communication.
Compliance Support for Directors
We guide you on statutory timelines, documentation access obligations, and how to avoid liability under Section 266(12).
Post-Audit Advisory
We help you interpret the auditor’s report and implement governance improvements for future cycles.