What is different about the first-year audit of a new Sdn Bhd?

Longer first period. Directors must prepare the first financial statements within 18 months of incorporation (section 248(1)(a)). The first financial year can therefore be longer than 12 months, depending on the year-end chosen.

Who appoints. The Board appoints the first auditor, at least 30 days before the end of the period for submitting the first financial statements to SSM (section 267(3)(a)). Members take over from the second year (section 267(4)).

What the auditor looks at

• share capital issued and paid up, and the supporting SSM records;
• pre-incorporation and set-up expenses;
• director and shareholder loans;
• bank accounts opened, deposits and licences;
• early contracts, fixed asset purchases and leases;
• accounting records kept from the first day (section 245).

Differences from later years

• no prior-year comparative figures;
• no prior auditor to speak to;
• less history to judge controls, so more direct testing.

Exemption check. A new company may qualify as dormant or by the size tests. The directive tests current and the past two years; it does not spell out how companies with less than three years of history are treated, so ask SSM or your auditor if unsure.

Tips

• Appoint early and agree a timetable.
• Keep bank statements, agreements and receipts for every start-up cost.
• Record director-paid expenses properly rather than leaving them undocumented.