Preparing financial statements for audit is an important responsibility for companies in Malaysia. Under the Companies Act 2016, directors must ensure that financial statements are properly prepared and provide a true and fair view of the company’s financial position and performance. These statements are typically audited annually unless the company qualifies for audit exemption.
Proper preparation not only ensures compliance with regulatory requirements but also helps auditors complete the audit efficiently. Below is a practical guide on how businesses in Malaysia can prepare their financial statements for audit.
1. Understand the Audit and Financial Reporting Requirements
In Malaysia, companies must prepare financial statements within six months after the financial year-end. These statements are then circulated to shareholders and lodged with the Companies Commission of Malaysia (SSM).
Financial statements must comply with approved accounting standards such as the Malaysian Financial Reporting Standards (MFRS) or Malaysian Private Entities Reporting Standard (MPERS). These frameworks ensure that the financial statements present a true and fair view of the company’s financial performance and position.
Even companies that qualify for audit exemption must still prepare proper financial statements and maintain accurate records.
2. Maintain Proper Accounting Records
The foundation of audit-ready financial statements is accurate bookkeeping. Malaysian companies are required to keep proper accounting records that explain transactions and financial position. These records must generally be retained for at least seven years.
Businesses should ensure that their accounting system records all transactions, including revenue, expenses, assets, and liabilities. Maintaining organized records throughout the year will make it easier to prepare year-end financial statements and support the audit process.
3. Prepare Core Financial Statements
Before the audit begins, companies must prepare a complete set of financial statements. These usually include the statement of financial position (balance sheet), statement of profit or loss and other comprehensive income, cash flow statement, and notes to the financial statements.
The notes are especially important because they provide additional explanations of accounting policies, major transactions, and financial risks. Accurate disclosures help auditors understand how the figures in the financial statements were derived.
4. Reconcile Accounts and Finalise the Trial Balance
Before submitting financial statements to auditors, companies should perform a thorough year-end closing process. This includes finalizing journal entries such as depreciation, accruals, and provisions. Account balances must also be reconciled with supporting documents.
For example, bank balances should match bank statements, receivables should match customer balances, and payables should match supplier records. A clean and accurate trial balance will significantly reduce delays during the audit.
5. Organise Supporting Documents
Auditors will request supporting documents to verify the accuracy of the financial statements. Companies should prepare these documents in advance and keep them well organized.
Common documents requested during an audit include bank statements and reconciliations, sales and purchase invoices, receipts and payment vouchers, payroll records, and tax filings. Trade receivables and payables reports are also commonly reviewed.
Having these documents readily available helps auditors complete their procedures faster and reduces the risk of audit queries.
6. Review Internal Controls and Processes
Strong internal controls help ensure that financial information is reliable and free from errors or fraud. Companies should review their accounting processes, approval procedures, and documentation practices before the audit begins.
Management may also conduct an internal review to identify weaknesses in financial controls and implement improvements. Clear documentation of internal procedures helps auditors assess the company’s financial reporting environment.
7. Communicate with the Auditor Early
Early communication with the audit firm can help prevent misunderstandings and delays. Companies should discuss the audit timeline, required documents, and potential issues with the auditor before the audit starts.
By cooperating closely with auditors and responding promptly to requests, companies can ensure a smoother and more efficient audit process.
Conclusion
Preparing financial statements for audit in Malaysia requires proper accounting records, compliance with approved standards, and organized documentation. By maintaining accurate bookkeeping, reconciling accounts, and preparing supporting documents early, companies can significantly reduce audit delays and ensure compliance with Malaysian regulations.
If your business needs assistance preparing financial statements or getting ready for an audit, professional support can make the process much easier. Consistant Info Sdn Bhd provides reliable accounting and financial statement preparation services to help Malaysian businesses stay compliant and audit-ready.
For professional assistance, contact Consistant Info Sdn Bhd at +60 11-2611 1773 today and ensure your financial statements are prepared accurately and efficiently.