In 2025, the statutory audit in Malaysia is characterized by two powerful and intertwined themes: a continued commitment to a rigorous, risk-based audit methodology, and a new, proactive era of firm-wide quality management. While new audit exemption criteria have changed the landscape for many private companies, the statutory audit remains a cornerstone of corporate governance and a critical mechanism for maintaining trust and confidence in the integrity of financial reporting.
The bedrock of audit practice in Malaysia is its full alignment with international standards. All statutory audits are conducted in accordance with the International Standards on Auditing (ISAs), as adopted by the Malaysian Institute of Accountants (MIA). This ensures that audits in Malaysia are performed to a globally recognized standard of quality and rigor.
The auditor's ultimate objective is to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework (MFRS or MPERS) and the requirements of the Companies Act 2016. This opinion provides essential assurance to shareholders, lenders, investors, and other stakeholders.
Modern auditing is not a one-size-fits-all exercise. The ISAs mandate a risk-based approach, which means the audit is tailored to the specific risks of each company. The key stages include:
A major development shaping the audit profession is the implementation of the International Standard on Quality Management (ISQM) 1. This standard represents a fundamental shift from a reactive, compliance-based approach to quality control to a proactive, risk-based approach to quality management. Key aspects of ISQM 1 include:
For Malaysian audit firms, the systems required by ISQM 1 have been in place since the end of 2022, and the focus in 2025 is on the ongoing effectiveness and continuous improvement of these systems.
Effective from January 1, 2025, new audit exemption criteria have been introduced for private companies in Malaysia. While this reduces the compliance burden for many SMEs, it also places a greater responsibility on the directors of those companies to ensure the accuracy of their financial reporting. For those companies that are not exempt, the statutory audit takes on an even greater significance, as it provides one of the few independent checks on the financial health and governance of the company.
The statutory audit in Malaysia in 2025 is a sophisticated and robust process. It is defined by a rigorous, risk-based approach to the audit itself, and a deep, firm-wide commitment to proactive quality management. In an increasingly complex business world, the statutory audit remains an essential service that underpins trust, promotes transparency, and supports the integrity of Malaysia's capital markets.
A 2025 guide to statutory audits in Malaysia. This article explains the risk-based audit approach under the International Standards on Auditing (ISAs) and the new proactive quality management standards under ISQM 1. Learn about the requirements of a statutory audit, the implications of the new audit exemption criteria, and the auditor's role in ensuring the integrity of financial reporting in Malaysia.