Malaysia

Corporate financial reporting requirements in Malaysia are outlined in several laws, which include the Companies Act 2016, Financial Reporting Act 1997, Central Bank of Malaysia Act 2009, Financial Services Act 2013, Islamic Financial Services Act 2013, and the Securities Commission Act 1993.

The Companies Act 2016 governs the incorporation of companies and sets requirements for companies to prepare financial statements and have them audited. The Act requires companies incorporated under the Act to have their financial statements audited. Auditors are required to register with the Malaysian Institute of Accountants (MIA) and conduct their audits in accordance with the Malaysian Approved Standards on Quality Control, Auditing, Review, Other Assurance and Related Services issued by the Auditing and Assurance Standard Board of the Malaysian Institute of Accountants. Meanwhile the financial statements are to be prepared in accordance with the approved accounting standards issued by the Malaysian Accounting Standards Board (MASB).

The MASB was established under Section 7 of the Financial Reporting Act of 1997 as an independent authority to develop and issue accounting standards for the preparation of financial statements, which are required to be prepared or lodged under any law administered by the Securities Commission, the Central Bank (BNM) or the Registrar of Companies in Malaysia.

The Malaysian Financial Reporting Standards (MFRS) as issued by the MASB are required for application by all entities except private entities. MFRSs are developed based on the International Financial Reporting Standards (IFRS). The private entities can either apply MFRS or the Malaysian Private Entity Reporting Standard (MPERS). MPERS is adopted word-for-word of IFRS for SMEs except for requirements around property development activities and changes in terminology. The IAASB standards are adopted without modifications.

A private entity is defined as a private company, incorporated under the Companies Act 2016, that (a) is not itself required to prepare or lodge any financial statements under any law administered by the Securities Commission or the BNM; and (b) is not a subsidiary or associate of, or jointly controlled by, an entity which is required to prepare or lodge any financial statements under any law administered by the Securities Commission or the BNM.

In addition to the above-mentioned financial reporting requirements, the following laws also apply to certain entities in Malaysia. The Central Bank of Malaysia Act 2009, Financial Services Act 2013 and Islamic Financial Services Act 2013 give the BNM regulatory authority for banks and insurance companies. These financial institutions are required to follow policy documents on Financial Reporting, Financial Reporting for Islamic Banking Institutions, and Financial Reporting for Takaful Operators.

The Securities Commission Act 1993 established the Securities Commission which is responsible for regulating all matters relating to securities. The Securities Commission sets additional audit and reporting requirements for entities under its supervision and enforces their application.

In Malaysia, the accountancy profession is regulated by the Securities Commission (SC), the Audit Oversight Board (AOB), the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia or SSM), the Malaysian Institute of Accountants (MIA), and the Malaysian Institute of Certified Public Accountants (MICPA).

The Accountants Act 1967 stipulates that no person shall practice or declare themselves as either a Chartered Accountant or licensed accountant unless registered with MIA. MIA confers the Chartered Accountant qualification and membership with the institute is mandatory for individuals who wish to practice in Malaysia. Under the Act, MIA is authorized to (a) determine the qualifications of persons for admission as members (b) provide for the training and education by the institute or any other body, of persons practicing or intending to practice the profession of accountancy; (c) approve the MIA Qualifying Examination and to regulate and supervise the conduct of that examination; and (d) regulate the practice of the profession of accountancy in Malaysia. In addition, under the Act, MIA may establish ethical requirements and an investigative and disciplinary (I&D) mechanism. Under the By-laws of the institute, MIA has also established a quality assurance (QA) mechanism. To register as a member of MIA, individuals must either (a) pass any of the final examinations as outlined in the Accountants Act, and have at least three years of working experience in the service of a Chartered Accountant or in a government department, local authority, or other commercial, financial, industrial or professional organization; or (b) be a member of a recognized body as outlined in the Accountants Act.

The Securities Commission (SC) was established under the Securities Commission Act 1993 (SCA). The SC has direct responsibility for rulemaking, enforcing regulations pertaining to capital markets, ensuring sustainable market growth and development, supervising capital market activities and market institutions including exchanges, clearing houses and registered market operators, and regulating all entities and persons licensed under the Capital Markets and Services Act 2007. Section 31U of the Securities Commission Act 1993 provides legislative authority to the AOB for ensuring independent oversight of auditors of Public Interest Entities (PIEs) by enforcing compliance with auditing and ethical standards among auditors of PIEs and registering auditors of PIEs. Under the same Act, the AOB is also given legislative authority to set auditing standards. The AOB, however, has delegated this responsibility to MIA. The IAASB standards are adopted without modifications.

MICPA is a professional body for accountants formed under the Companies Ordinances 1940/1946. It sets ethical requirements for its members, provides technical advice to regulatory bodies, and confers the Certified Public Accountant designation. In addition, as authorized under its By-Laws, MICPA has established both ethical requirements and an investigative and disciplinary (I&D) system for its members. Membership in the institute is voluntary. Individuals interested in membership with MICPA must complete the MICPA Programme and complete three years of relevant practical training experience. Individuals can also undertake the MICPA qualifying examination as stipulated under the MICPA By-laws providing that the candidate is a Full Member in good standing with one of the government’s approved accounting bodies.

The Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia or SSM), formed as a regulatory body in 2002, enforces the Companies Act 2016, the Registration of Business Act 1956 and the Trust Companies Act 1949, and carries out the monitoring and enforcement activities related to companies incorporated under the Companies Act 2016. The Corporate Accounts Monitoring Section of the SSM is responsible for the registration of audit firms, monitoring of changes in audit firms and auditors and monitoring the resignation and removal of auditors. SSM imposes sanctions on companies, their directors, and their auditors.

Section 31U of the Securities Commission Act 1993 provides legislative authority to the Audit Oversight Board (AOB) for ensuring independent oversight of auditors of Public Interest Entities (PIEs) by enforcing compliance with auditing and ethical standards among auditors of PIEs and registering auditors of PIEs.

The key responsibilities of the AOB are to:

• Implement policies and programs in ensuring an effective audit oversight system in Malaysia.
• Register auditors of public interest entities (PIEs).
• Establish or adopt the auditing and ethical standards to be applied by auditors.
• Conduct inspections and monitor programs on registered auditors to assess the degree of compliance of auditing and ethical standards.
• Conduct inquiries and impose appropriate sanctions against auditors who fail to comply with auditing and ethical standards.
• Cooperate with relevant authorities in formulating and implementing strategies for enhancing standards of financial disclosures of PIEs.
• Liaise and cooperate with oversight bodies outside Malaysia to enhance the standing of the auditing profession in Malaysia and internationally; and
• Perform such other duties or functions as the Audit Oversight Board determines necessary or appropriate to promote high professional standards of auditors and to improve the quality of audit services provided by auditors.

The AOB is a member of the International Forum of Independent Audit Regulators (IFIAR).

The Malaysian Institute of Accountants (MIA)

Under the Accountants Act 1967, MIA is able to (a) to determine the qualifications of persons for admission as members; (b) to provide for the training and education by the institute or any other body, of persons practicing or intending to practice the profession of accountancy; (c) to approve the MIA Qualifying Examination and to regulate and supervise the conduct of that examination; (d) to regulate the practice of the profession of accountancy in Malaysia; (e) to promote the interests of the profession of accountancy in Malaysia; (f) to provide assistance to members or their dependents as fit with a view to protecting or promoting the welfare of members; and (g) generally to do such acts for the purpose of achieving any of the aforesaid objectives. The country’s Accountants Act stipulates that no person shall practice or declare themselves as either a Chartered Accountant or licensed accountant unless registered with MIA. MIA confers the Chartered Accountant qualification and membership with the institute is mandatory. In addition to being a Member of IFAC, MIA is also a member of the ASEAN Federation of Accountants (AFA).

The Malaysian Institute of Certified Public Accountants (MICPA)

MICPA is a professional body for accountants formed under the Companies Ordinances 1940/1946. It sets ethical requirements for use by its members, provides technical advice to regulatory bodies, and confers the Certified Public Accountant designation. In addition, as authorized under its By-Laws, MICPA has established both ethical requirements and an I&D system for its members. Membership in the institute is voluntary. There is a close working relationship between MICPA and MIA. In addition to being a Member of IFAC, MICPA is an Associate member of AFA.

In Malaysia, the Audit Oversight Board (AOB) and the Malaysian Institute of Accountants (MIA) are responsible for establishing and operating quality assurance (QA) mechanisms in the jurisdiction.

Under Part IIIA of the Securities Commission Act 1993, the AOB is responsible for conducting QA reviews of audit firms that are registered with the AOB and that audit Public Interest Entities (PIEs). The AOB undertakes inspections, and acts, including sanctions, against audit firms and auditors for non-compliance with relevant auditing and ethical standards.

Under Section B250 of the MIA By-laws (On Professional Ethics, Conduct and Practices), MIA is responsible for surveillance and enforcement of audit firms registered with MIA, through its Practice Review Framework. The institute reports that its program complies with the best practices outlined in SMO 1 and that it has adopted and published quality control standards requiring firms to implement a system of quality control in line with ISQC 1. This framework is mandatory for all members of MIA.

Although AOB is entrusted to regulate auditors of PIEs, MIA is still empowered to carry out a review when the need arises.

MIA has approved the IAASB’s Quality Management (QM) standard for adoption in Malaysia with the effective date set by the IAASB (15 December 2022).

Current Status: Adopted

In Malaysia, Initial Professional Development (IPD) and Continuing Professional Development (CPD) requirements for professional accountants are set independently by the two Professional Accountancy Organizations in the jurisdiction: the Malaysian Institute of Accountants (MIA) and the Malaysian Institute of Certified Public Accountants (MICPA).

Under the Accountants Act 1967, MIA is responsible for establishing IPD and CPD requirements for Chartered Accountants in Malaysia. MIA has established IPD and CPD requirements that are overall aligned with the IES.

The MIA Education Board is responsible for the accreditation of accounting degree programmes for the purpose of admission as Chartered Accountant (C.A. (M)). As of October 2022, the MIA Education Board had released the MIA Competency Framework (MIA CFM) that is developed based on the International Education Standards. In the MIA CFM model, the IES 1 – IES 8 are incorporated into the framework and the concept of the three proficiency levels of Foundation, Intermediate and Advanced had been adopted.

Under the authority of its By-Laws, MICPA administers and adopts the Chartered Accountants Australia and New Zealand (CAANZ) qualification program, except for the module on taxation, to assess students who wish to become members of MICPA. The module on taxation, as reported by MICPA, is administered by MICPA. MICPA has also developed other requirements for its members, including practical training, and CPD that it reports, meets the requirements of the IES.

Current Status: Adopted

The Companies Act 2016 establishes that all public and private companies have a mandatory statutory audit requirement regardless of their size.

Under the Securities Commission Act 1993, the Auditing Oversight Board (AOB) is given legislative authority to set auditing standards. The AOB, however, has delegated this responsibility to the Malaysia Institute of Accountants (MIA). The MIA’s Auditing and Assurance Standards Board (AASB) has adopted IAASB standards without modifications.

The Auditing and Assurance Standards Board reviews standards, technical pronouncements and Discussion Papers issued by the IAASB as and when these are being issued.

Current Status: Adopted

In Malaysia, ethical requirements for professional accountants are established by the two professional accountancy organizations (PAOs): the Malaysian Institute of Accountants (MIA) and the Malaysian Institute of Certified Public Accountants (MICPA). Both PAOs set ethical standards under the oversight of the Audit Oversight Board.

Under the Accountants Act 1967, MIA is responsible for establishing ethical requirements for its members who are Chartered Accountants. MIA’s Ethics Standard Board (ESB) was set up by the MIA Council to promote adherence to high quality ethical standards. In 2010, the ESB substantially adopted all the requirements of the IESBA Code of Ethics while making some modifications to ensure consistency with the Malaysian legislative framework and suit the Malaysian professional environment. MIA’s ethical requirements are embodied under Part I of the MIA By-Laws (MIA’s Code of Ethics) and are subject to an ongoing update process following revisions to the IESBA Code. The institute reported that it has adopted the 2020 International Code of Ethics issued by IESBA and all subsequent updates effective as of December 2021.

Under the MICPA By-Laws, MICPA has also adopted the 2020 International Code of Ethics issued by IESBA for its members and its subsequent updates.

Current Status: Partially Adopted

The Department of the Accountant General of Malaysia is responsible for the accounting functions of both Federal and State governments in Malaysia and endeavors to comply with the requirement of IPSAS where possible. The Government Accounting Standards Advisory Committee is a committee established under the Accountant General’s Department to develop Malaysian Public Sector Accounting Standards (MPSAS). MPSAS have been adapted from IPSAS.

While the standards in Malaysia are developed in line with accrual-basis accounting, application is still in the pre-transition phase and legislation mandating accrual accounting is still pending approval by Parliament.

Current Status: Partially Adopted

In Malaysia, the two professional accountancy organizations (PAOs)—the Malaysian Institute of Accountants (MIA) and the Malaysian Institute of Certified Public Accountants (MICPA) are responsible for the investigation and discipline (I&D) of their members. Regulators, including AOB, SSM, Securities Commission, Bursa Malaysia, Bank Negara and other regulators have the power to carry out I&D if professional accountants contravenes the laws and regulations of the respective regulators.

Under the authority of the Accountants Act 1967, MIA has established an I&D mechanism to investigate formal complaints and cases of unprofessional conduct by its members, and to refer any matter to a Disciplinary Committee where appropriate. Investigation and disciplinary proceedings are carried out and decisions are made in accordance with the Malaysian Institute of Accountants (Disciplinary) (No. 2) Rules of 2002. MIA reports that its I&D system is aligned with SMO 6.

Under Part IIIA of the Securities Commission Act 1993, an Audit Oversight Board (AOB) was established to provide independent oversight of auditors of Public Interest Entities. The AOB inspects and acts against registered auditors for non-compliance with the relevant auditing and ethical standards. It is unclear if the systems adopted by the AOB are aligned with the requirements of SMO 6.

Under its By-Laws, MICPA is responsible for establishing an I&D mechanism for its members. The institute has conducted a review of its system and reports it incorporates all SMO 6 requirements.

Current Status: Partially Adopted

Under the Financial Reporting Act 1997, the Malaysian Accounting Standards Board (MASB) was established as an independent authority to develop and issue accounting standards for the preparation of financial statements. Financial statements are required to be prepared in accordance with laws administered by the Securities Commission, the Central Bank of Malaysia (BNM) or the Registrar of Companies in Malaysia. Accounting standards for entities other than private entities are the Malaysian Financial Reporting Standards (MFRS), while private entities are required to apply the approved accounting standards for private entities (MPERS). MFRS framework is developed identical to IFRS and is updated on an ongoing basis. The MPERS is identical to IFRS for SMEs except for requirements related to real estate.

Current Status: Adopted

Relevant Organizations

• Auditing and Assurance Standards Board (AASB)
• Malaysia Institute of Accountants (MIA)
• Malaysia Institute of Certified Public Accountants (MICPA)
• Malaysian Accounting Standards Board
• Suruhanjaya Syrikat Malaysia (SSM)

Relevant Legislation

• Accountants Act of 1967
• MIA By-Laws
• MIA Rules of 2001

Relevant Publications

• IFRS Foundation, “IFRS Application Around the World, Jurisdictional Profile: Malaysia,” 2021.
• MIA, Organizational Profile & SMO Action Plan, 2022.
• MICPA, Organizational Profile & SMO Action Plan, 2022.