What is the difference between an audit, a review and a compilation of accounts?
An audit gives the highest level (reasonable) assurance and is the only one that meets the statutory audit requirement. A review gives limited assurance, and a compilation gives none, because the accountant only assembles the figures. Only a valid audit or a valid audit exemption satisfies the Companies Act.
Audit. Independent examination of the accounts and records, with testing, third-party evidence and a formal opinion on whether they give a true and fair view (section 266). It gives reasonable assurance, not absolute guarantee. Only an approved company auditor can sign it (sections 263-264).
Review. Mainly enquiries and analytical procedures. It results in a conclusion that nothing has come to the accountant's attention suggesting the accounts are materially misstated, which is limited assurance. It is less costly and less detailed than an audit.
Compilation. The accountant helps put the figures into financial statement form using information you supply. No assurance is given.
Which meets the law?
| Engagement | Satisfies s.248(2) / s.267 audit duty? |
|---|---|
| Audit by approved company auditor | Yes |
| Review | No |
| Compilation or management accounts | No |
| Unaudited accounts under audit exemption | Not an audit, but permitted if all conditions in PD 10/2024 are met |
Audit-exempt companies lodge unaudited statements. A review or compilation may help improve quality or satisfy a bank, but it does not create the exemption, and the exemption does not depend on having one.
Choosing. Ask the bank, investor or tender body what level it wants. Never describe reviewed or compiled accounts as audited.
Review and compilation engagements are defined by professional standards, not by the Companies Act.
Legal basis
- Companies Act 2016, ss.248(2), 263, 264, 266, 267
Sources
Applies to 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- How does a qualified or adverse audit opinion affect bank loans and tax?No law bans lodging a modified opinion, but lenders, tenderers and investors usually treat it as a warning and may ask questions, add conditions or decline. Tax is mostly separate: LHDN works from your financial statements and tax computation, not the opinion type.
- When do banks, tenders or grants require audited accounts even if my company is exempt?Company law may excuse an audit, but lenders, tender bodies, grant providers and investors set their own conditions and often ask for audited accounts. SSM itself notes exempt companies may still need audits for financing or contractual obligations.
- Does every Sdn Bhd in Malaysia need to be audited?Not every one, but audit is the default. Section 267(1) of the Companies Act 2016 requires a private company to appoint an auditor for each financial year, unless it qualifies for and elects the audit exemption set by SSM's Practice Directive 10/2024.
- What is audit exemption for private companies in Malaysia?Audit exemption lets an eligible private company choose not to appoint an auditor for a financial year. It rests on section 267(2) of the Companies Act 2016 and SSM Practice Directive 10/2024. The company still prepares and lodges unaudited financial statements.
- What are the audit exemption thresholds for a Sdn Bhd in 2026?For financial periods starting 1 January to 31 December 2026 (Phase 2), a private company must meet at least two of three tests: revenue up to RM2,000,000, total assets up to RM2,000,000, and no more than 20 employees. Each test covers the current and past two years.