By AZIZAM AZIZAN
UNAUDITED REPORT: WHAT TO UNDERSTAND?
In the realm of business and finance, transparency and accurate reporting are paramount for maintaining trust and confidence among stakeholders. The Companies Act 2016 and the Suruhanjaya Syarikat Malaysia (SSM) play crucial roles in regulating and governing the operations of companies in Malaysia. One essential aspect of corporate reporting is the presentation of financial information, which can be either audited or unaudited. In this article, we delve into the concept of unaudited reports in accordance with the Companies Act 2016 and SSM regulations.
Qualifying Criteria for Audit Exemption
SSM introduced Practice Directive No. 3/2017, underscoring that audit exemption is available to specific categories of private companies, namely those classified as dormant, zero–revenue, and meeting defined threshold criteria.
I. A dormant company can be granted audit exemption if it has maintained its inactive status since its incorporation or throughout the present financial year and the immediate previous financial year.
II. An audit exemption is applicable to a zero–revenue company if it reports zero income in the current financial year and the two financial years immediately prior. Furthermore, the company’s total assets in both the current Statement of Financial Position (FS) and the FS of the two preceding financial years should not exceed RM300,000.
III. Companies that meet specific threshold qualifications are eligible for audit exemption provided they fulfil the following prerequisites:
Revenue for the current financial year and the two preceding financial years does not exceed RM100,000.
The total assets indicated in the current Statement of Financial Position and the FS of the two immediate past financial years are less than RM300,000.
The company’s employee count is limited to a maximum of five (5) individuals at the close of the present financial year and at the close of each of the two preceding financial years.
Companies Act 2016: Implications for Unaudited Reports
The Companies Act 2016 is the principal legislation governing companies in Malaysia. It outlines the requirements and procedures for various corporate matters, including financial reporting. According to the Companies Act 2016, every company is required to prepare and submit financial statements, which include the balance sheet, income statement, cash flow statement, and notes to the financial statements. While the Act does not explicitly mandate the audit of financial statements for all companies, certain categories of companies are required to have their financial statements audited. These categories may include public listed companies, financial institutions, and companies that meet specific criteria outlined in the Act.
For companies that are not required to have their financial statements audited, unaudited reports play a pivotal role. Such reports provide interim financial information that can assist stakeholders in making informed decisions. However, it’s important to note that unaudited reports may not provide the same level of assurance as audited financial statements, as they have not undergone the scrutiny of an independent auditor.
Requirements and Obligations
Any company that elects to be exempted from audit is still obliged to prepare its unaudited financial statements in accordance with applicable approved accounting standards pursuant to the CA 2016.
The unaudited financial statements shall be lodged together with the directors’ report, statement by directors and statutory declaration pursuant to the CA 2016 accompanied by the Audit Exemption Certificate within thirty (30) days from the circulation date of the unaudited financial statements and reports.
Unaudited reports hold significance in providing a preliminary view of a company’s financial performance and position, especially for companies not subjected to mandatory external audits under the Companies Act 2016. While unaudited reports lack the formal verification provided by external auditors, they offer stakeholders valuable insights into a company’s financial health. However, it’s important for companies to approach the preparation of unaudited reports diligently, ensuring accuracy and transparency to maintain stakeholder confidence and comply with SSM regulations. As the landscape of business continues to evolve, the role of unaudited reports remains a crucial aspect of corporate reporting in Malaysia.