In Malaysia, businesses may undergo several types of audits depending on their legal obligations, operational needs and strategic goals. Understanding the different types of audits can help companies better prepare for compliance and enhance internal processes.
- Statutory Audit
This is the most common and legally required audit. Under the Companies Act 2016, all companies except exempt private companies must appoint a qualified auditor to perform an annual statutory audit. The goal is to express an independent opinion on whether the financial statements provide a true and fair view of the company’s financial position, in compliance with Malaysian Financial Reporting Standards (MFRS) or Private Entity Reporting Standards (PERS).
- Internal Audit
Internal audits are conducted within the company, either by an in-house team or an external provider, to evaluate internal controls, risk management, and governance processes. Unlike statutory audits, internal audits are not mandatory but are highly beneficial for operational effectiveness, particularly in medium to large enterprises.
- Tax Audit
Conducted by the Inland Revenue Board (LHDN), a tax audit examines a company’s tax filings and supporting documents to ensure compliance with the Income Tax Act 1967. Tax audits can be either desk audits or field audits and may be triggered by discrepancies in reported figures, industry benchmarks or random selection.
- Compliance Audit
A compliance audit determines whether a company adheres to external regulatory requirements or internal policies. These audits are especially relevant in regulated industries such as financial services, manufacturing and healthcare. The goal is to assess whether the business is meeting obligations under specific laws, licenses or industry standards.
- Operational Audit
Operational audit assesses the efficiency and effectiveness of a company’s processes, departments or systems. The focus is not just on finances, but on overall performance. This type of audit is useful for identifying areas of improvement and cost-saving opportunities.
- Forensic Audit
A forensic audit investigates financial records to detect or investigate fraud, embezzlement or misconduct. These audits are often part of legal proceedings and require auditors with specialized investigative skills. Forensic audits may also be conducted preemptively in high-risk sectors or during internal disputes.
- Information Systems (IS) Audit
This audit evaluates the controls over a company’s IT systems and data management processes. As businesses become increasingly digitized, IS audits help ensure that digital assets are secure, compliant with data protection laws and functioning efficiently.
Choosing the right audit depends on your business type, industry and objective. While statutory audits are mandatory for most, internal and operational audits provide value in boosting performance.