Recommended Audit Fee in Malaysia

Recommended Audit Fee in Malaysia

The Malaysian Institute of Accountants (“MIA”), had in 2010, issued a Recommended Practice Guide 7 (Revised) on the charging of audit fees.  This is a replacement to the earlier practice guide issue in 2007.  All auditors in Malaysia are required to abide by this practice guide.

Purpose

The MIA issued this Practice Guide because of the following reasons:-

  1. Increased in compliance burden due to higher auditing standards requirements
  2. Increased in operating costs, mainly salaries
  3. To ensure auditors professionalism are not affected due to “price wars” among auditors

Audit fee rates computation

The general method of determining audit fees is based on either Turnover or Total Assets.  Methods used are according to nature of business.  Example, for a trading company will use Turnover as audit fees, whereas an asset based company will use the Total Assets method.

(i)         Gross Turnover or Total Assets Basis

Gross Assets or Turnover

(RM)

Cumulative

Amounts

(RM)

Rate

(%)

Fees

(RM)

Cumulative Fees

(RM)

The first 100,000

100,000

1.000%

1,000

1,000

The next 150,000

250,000

0.438%

657

1,657

The next 250,000

500,000

0.313%

783

2,440

The next 500,000

1,000,000

0.188%

940

3,380

The next 1,500,000

2,500,000

0.125%

1,875

5,255

The next 2,500,000

5,000,000

0.100%

2,500

7,755

The next 5,000,000

10,000,000

0.094%

4,700

12,455

10,000,000 to 20,000,000

1,000 for every RM1,000,000 increase of a fraction thereof up to RM20,000,000

Above 20,000,000

Negotiable (but should not be less than RM20,000 per assignment)

In cases where the above methods are not practical to be used, the method below will be applied instead.  An example where a company has Turnover of RM10 million, Total Assets of only RM5,000, and operating expenses of RM2 million.

(ii)       Total Operating Expenditure Basis

Gross Assets or Turnover

(RM)

Cumulative

Ringgit

(RM)

Rate

(%)

Fees

(RM)

Cumulative Fees

(RM)

The first 50,000

50,000

2.500%

1,250

1,250

The next 150,000

200,000

1.250%

1,875

3,125

The next 800,000

1,000,000

0.625%

5,000

8,125

The next 1,000,000

2,000,000

0.250%

2,500

10,625

Above 2,000,000

0.125%

Lastly, the Practice Guide also mentioned specifically that the audit fee for a Dormant Company shall be a minimum of RM800.

If you wish to find out more about audit fees for your company, contact us now to receive a free consultation.