In Malaysia, companies are generally required to prepare and submit audited financial statements in compliance with the Companies Act 2016. A failure to complete or submit audit requirements on time can lead to serious compliance, financial, and operational consequences.
This article explains what happens when a company fails audit submission and why it should not be taken lightly.
What is Audit Submission?
Audit submission refers to the process where a company:
- Prepares its financial statements
- Undergoes an independent statutory audit
- Presents audited financial statements to regulators such as Suruhanjaya Syarikat Malaysia (SSM)
The audited accounts are usually required for annual return filing and corporate compliance.
Is Audit Submission Mandatory?
For most companies in Malaysia:
- Yes, audit submission is mandatory under the Companies Act 2016
- Only certain companies may qualify for audit exemption, subject to strict criteria
Failure to comply with audit requirements is considered a statutory breach.
What Happens If a Company Fails Audit Submission?
1. Penalties and Compound Fines
SSM may impose:
- Monetary penalties
- Compounds for late or non-submission
- Additional fines for repeated non-compliance
The longer the delay, the higher the risk of enforcement action.
2. Legal Action Against Directors
Company directors may be held personally responsible for:
- Failure to comply with statutory duties
- Non-filing of audited accounts
- Breach of Companies Act obligations
In serious cases, directors may be summoned or prosecuted.
3. Risk of Company Being Struck Off
If a company continuously fails to submit audited accounts:
- SSM may initiate strike-off proceedings
- The company may be removed from the register
This means the company legally ceases to exist.
4. Difficulty in Banking and Financing
Without audited financial statements, companies may face:
- Loan rejection from banks
- Difficulty renewing credit facilities
- Reduced investor confidence
Banks typically require audited accounts for financial assessment.
5. Tax and Regulatory Issues
Failure to submit audited accounts can trigger:
- Higher scrutiny from tax authorities
- Difficulty in supporting tax filings with Lembaga Hasil Dalam Negeri Malaysia (LHDN)
- Increased risk of tax audit or investigation
6. Loss of Business Credibility
Audited financial statements build trust. Without them:
- Business partners may lose confidence
- Investors may withdraw interest
- Company reputation may be affected
Common Reasons Companies Fail Audit Submission
- Poor bookkeeping or incomplete records
- Delayed appointment of auditor
- Ignoring compliance deadlines
- Lack of internal accounting systems
- Financial disputes or unresolved accounting issues
How to Avoid Audit Failure
To stay compliant, companies should:
✔ Maintain proper accounting records throughout the year
✔ Engage auditors early (not last minute)
✔ Ensure timely preparation of PBC documents
✔ Monitor filing deadlines with a company secretary
✔ Implement basic internal controls
Failing to submit audited accounts is not just an administrative issue — it is a serious compliance breach that can lead to financial penalties, legal consequences, and even company closure.