Q&A on Auditors Requirement of Malaysia Company-Company Formation_Trademark Registration_Tax Service - Hong Kong CPA

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Auditing - Malaysia

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Q&A on Auditors Requirement of Malaysia Company

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Q：

Who is required to appoint an auditor under the Companies Act 2016?

A：

All public companies and private companies in Malaysia must appoint an auditor for each financial year, unless the private company qualifies for audit exemption under the guidelines issued by the Companies Commission of Malaysia (CCM).

Q：

When must a company appoint its first auditor?

A：

For a private company, the Board of Directors (“BOD”) must appoint an auditor at least 30 days before the end of the period for submitting its first financial statement to CCM unless the company qualifies for audit exemption. If BOD fails to appoint an auditor, the members of the company may appoint an auditor by ordinary resolution via written resolution.

While for a public company, the BOD must appoint an auditor at any time before its first Annual General Meeting (“AGM”). The auditor appointed shall remain in office until the first AGM is concluded. If the BOD fails to appoint an auditor, the member must appoint one by ordinary resolution at the AGM.

Q：

What is the term of office of an auditor?

A：

The term of an auditor is determined by the terms of their appointment, with specific provisions for private companies and public companies:

Private Companies
An auditor holds office until a successor is appointed unless he is the first auditor of the company. The auditor’s term automatically ends 30 days after the circulation of the financial statements to the members, unless they are reappointed.
Public Companies
An auditor holds office until a successor is appointed unless he is the first auditor of the company. The auditor’s term automatically ends at the conclusion of the AGM, unless they are reappointed at the AGM.

Q：

What happens if a company fails to appoint an auditor?

A：

If a company fails to appoint an auditor within the required timeframe, the Registrar has the authority to appoint one or more auditors. This appointment can be made upon receiving a written request from the company's members.

Additionally, if a company fails to appoint an auditor as required, the company may be subject to penalties or fines under the Companies Act 2016. This can lead to potential non-compliance issues, affecting the company’s statutory obligations and financial reporting.

Q：

What are eligibility criteria to act as an auditor?

A：

To act as an auditor of a company in Malaysia, a person must meet the eligibility criteria set out in Sections 263 and 264 of the Companies Act 2016:

Approval by the Minister of Finance
The individual must be an approved company auditor, meaning they have been approved by the Minister of Finance under Section 263 of the Companies Act 2016. This approval is granted upon application and is subject to conditions determined by the Minister. The approval must be valid and not revoked. If an individual’s approval as an auditor is revoked by the Minister, they are no longer eligible to act as an auditor.

Not Disqualified Under Section 264
An individual is disqualified from being appointed as a company auditor if they:

(a)	are not an approved auditor.
(b)	are indebted to the company beyond a prescribed amount.
(c)	or their spouse are an officer of the company (e.g., director or employee).
(d)	are a partner, employer or employee of an officer of the company.
(e)	are a partner or employee of an employee of an officer of the company.
(f)	or their spouse are shareholder in a corporation whose employee serves as an officer of the company.
(g)	have been convicted of fraud or dishonesty.
(h)	have been declared bankrupt.

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