In Malaysia, statutory audits are governed by the Companies Act 2016 and must follow the standards issued by the Malaysian Institute of Accountants (MIA), including the Malaysian Approved Standards on Auditing (MASA). The audit process is designed to ensure that a company’s financial statements present a true and fair view of its financial position.
I. Engagement & Planning
- Engagement Letter: The audit begins with an agreement between the company and the auditor outlining the scope, responsibilities, and audit fees.
- Understanding the Business: The auditor gathers knowledge about the company’s industry, internal control systems, business risks, and financial reporting framework (e.g., MPERS or MFRS).
- Audit Strategy: An audit plan is developed to determine timelines, materiality thresholds, and risk areas to focus on.
II. Risk Assessment & Internal Control Review
- Identifying Risk Areas: The auditor evaluates areas likely to contain material misstatements (Example : revenue recognition, inventory, receivables).
- Review of Internal Controls: The company’s internal control environment is assessed to understand how reliable the existing processes are.
III. Substantive Testing
- Verification of Transactions and Balances: Auditors examine accounting records, supporting documents such as invoices, contracts, bank statements, and perform testing to confirm the accuracy of reported figures.
- Analytical Review: Financial data is analyzed for unusual trends or variances that may require further investigation.
IV. Completion Procedures
- Final Review: The auditor ensures all material areas have been covered, evaluates audit evidence gathered, and checks for compliance with accounting standards.
- Client Discussions: Any issues or adjustments identified are discussed with management. This may include proposed journal entries or improvements to internal controls.
V. Audit Report Issuance
- Unqualified Opinion: Indicates the financial statements give a true and fair view such as a clean report.
- Qualified/Adverse Opinion or Disclaimer: Issued if there are material misstatements or limitations in scope.
- The signed Audit Report is then attached to the company’s financial statements and submitted to the Companies Commission of Malaysia (SSM) as part of annual compliance.
Resources : https://www.ssm.com.my/Pages/Home.aspx , https://www.mia.org.my