Tags

By SMP Department, Professional Practices & Technical Division

To ensure a smooth adaptation to any forthcoming revisions in audit exemption thresholds, MIA advocates for a deliberate and phased strategy that aligns with SSM’s objectives of alleviating regulatory burdens and cost for small enterprises while addressing the audit profession’s talent shortage. 

MIA believes that SSM will aim to strike a fine balance facilitating regulatory relief and upholding the integrity of financial reporting. Meanwhile, it is imperative to educate companies to understand the significance of submitting accurate unaudited financial statements and grasp the repercussions of failing to do so. Accounting firms can play a pivotal role in aiding companies to navigate regulatory compliance. 

Small and Medium Enterprises (SMEs)

Notwithstanding these audit exemptions, it is essential that proper accounting records are maintained and companies should still be cognisant of the compliance requirements in relation to the following:

  • Preparation of unaudited financial statements;
  • Maintenance of proper accounting records;
  • Empowerment of shareholders who have at least 5% voting rights to require a company to prepare audited financial statements.

MIA urges all eligible companies to carefully review and consider any changes to the audit exemption criteria and to seek advice from qualified professionals when necessary. Thorough consideration of the implications is necessary for enterprise owners to make informed decisions about their compliance requirements. For more information about services provided by an accountancy firm, please refer to MIA’s publication Business Excellence Guide for SMEs.

For more information about the value of audit, please refer to MIA’s publication Why Audit Matters to SMEs. 

In the absence of statutory audits, the quality of financial statements of companies may be supported by other means such as compilation or review engagements. For more information about the compilation and review services, please refer to IFAC’s publication Comparing Audit, Review, Compilation and Agreed-Upon Procedures Services.  

Small and Medium Practices (SMPs)

MIA recognises that small and medium audit firms are an integral part of the Malaysian accountancy profession, and their success is essential for the overall health of the industry. We are committed to supporting these firms as they continue to serve as vital contributors to the nation’s economic growth.

This potential change in audit exemption criteria will inevitably impact on audit firms. As such, there is a compelling need to facilitate the transformation of services of small audit firms into a more dynamic landscape and to advance up the value chain of professional services, effectively catering to the demands of SMEs and alleviating the strain due to the current shortage of auditing personnel in Malaysia.

In preparing practising members for audit exemption, MIA had adopted a two-pronged approach to enhance the services offered by SMPs and to advocate for value of audit since 2016. 

Recognising that there may be appropriate alternatives in cases where an audit is not required, review and agreed-upon procedures engagements have the potential to be an attractive and fast-growing service offering to SMEs. MIA has been promoting alternative services to audit for small practitioners. SMPs are urged to focus their resources on moving up the value chain to provide higher value-adding services that are in demand by SMEs, explore other services which are not heavily regulated, and be trusted business advisors for SMEs. The small audit firms are also urged to take steps to strengthen their competitive edge through merger and acquisition or strategic affiliation.

To create awareness among SMEs on the benefits of a voluntary audit, MIA also published informative booklets ‘Why Audit Matters to SMEs” and “Business Excellence Guide for SMEs” in 3 languages, as well as conducting various engagement sessions with Chambers of Commerce and SMEs to educate on the value of audit. MIA is currently still engaging with various stakeholders to promote the benefits of voluntary audits, even for SMEs exempted from audit. Small companies that perceive audits to be beneficial are more likely to continue being audited and pay a reasonable fee.

Suggested Strategies for Audit Firms

Here are some suggested strategies for audit firms to consider in coping with the increase in audit exemption thresholds:

Diversify Service Offerings, Enhance Business Advisory and Specialise in Niche Markets

Audit firms should consider a broader range of services beyond traditional auditing by providing high-value advisory services, such as financial planning, strategic consulting, mergers and acquisitions support and performance improvement guidance. Develop industry expertise in niche markets, understand the unique challenges and regulations within those sectors, and tailor your services to address the specific needs.

Offer Review or Compilation Services

Review and compilation engagements may be more suitable and cost-effective for smaller companies. By promoting these services, you can cater to the needs of businesses eligible for audit exemption while still addressing the reliability of financial information.

To learn more about the Review and Compilation Engagements, please view the following IFAC’s publications:

Invest in Technology

Embrace technology to improve the efficiency and effectiveness of your services. Implement data analytics, artificial intelligence, and automation to streamline your work processes to support diversified service offerings.

To get more support on your firm’s digital transformation journey, please visit the MIA Digital Economy Website at https://MIA.org.my/knowledge-centre-resources/digital-economy/ .

Network, Collaborate and Explore M&A

Collaborate with legal, tax, and financial advisory firms. Building strategic partnerships can create a network of professionals who can collectively provide comprehensive solutions to clients, making your firm even more valuable.

To look for accounting firms that are interested in some forms of affiliation, please visit https://e-merger.mia.org.my/

Moving forward

Recognising the critical need to maintain an equilibrium between streamlining regulatory burdens and maintaining the integrity of financial information, the MIA has not only articulated its stance but also put forth constructive recommendations to SSM. These recommendations are intended to promulgate the implementation of safeguards aimed at fortifying the effectiveness of changes to the audit exemption criteria:

While the MIA continues to advocate for the above safeguards, small audit firms are encouraged to reach out to MIA on their specific concerns, questions or feedback through [email protected]. The Institute is committed to provide assistance in adapting to the revision in audit exemption thresholds and addressing the interests of smaller audit firms.

This is the second of a two-part article on navigating audit exemption thresholds in Malaysia. Part 1 can be accessed here.

Print Friendly, PDF & Email