This booklet provides a quick guide in illustrating the value of an audit to various stakeholders whilst emphasising the benefits derived from the decision to have accounts audited.
The main message of the booklet is that the cost of audit to an entity should not be considered in isolation of the benefits to be derived by that entity.
What is an audit?
An audit is an objective examination designed to yield a reasonable level of assurance, through independent verification of important financial information. Whatever cost savings that may be achieved, the benefits of having an audit outweigh them.
Currently, all companies enjoying the privilege of limited liability must subject their businesses to mandatory audits to safeguard the interest of third party users and other stakeholders. An audit can be considered to be a service to the public at large and it is a small price to pay for the limited liability protection that a company enjoys.
Benefits of an Audit
Among others, audit brings financial discipline, which is especially important as under the new Companies Act 2016, increased liabilities will be imposed on company directors for failing to prepare proper financial statements. The penalty imposed under the Companies Act 2016 is a fine not exceeding five hundred thousand ringgit or imprisonment for a term not exceeding three years or both.
Furthermore, an external audit ensures proper tax returns are filed with the Inland Revenue Board (IRB). Section 77A(4) of the Income Tax Act requires tax returns furnished by companies to be based on audited accounts. Proper tax returns based on audited accounts could actually save SMEs from penalties which could exceed their audit fees.
Given the importance of audit and its relevance to various stakeholders, MIA had pro-actively published this reader-friendly booklet which will be distributed to SMEs and the relevant stakeholders during MIA engagement sessions in 2017.
SMEs can obtain a complimentary copy of the booklet from MIA’s office in Bangsar South or call us for more details.