Understanding How Your Audit Cost is Calculated & How to Reduce It
The value of an audit depends on the credibility and independence of the auditor. Users of financial statements—such as shareholders, regulators, or banks—rely on the auditor to identify material errors or fraud and report them honestly. For this reason, audit fees must be carefully structured to preserve the auditor’s objectivity, independence, and professional ethics.
Setting fees that are too low or too high can compromise quality or trust, which is why determining an appropriate audit fee is both sensitive and essential.
While the Malaysian Institute of Accountants (MIA) previously provided guidelines under Recommended Practice Guide 7 (RPG 7), these were withdrawn in 2015. However, auditors still apply two main principles to determine a fair audit fee:
Audit fees are calculated based on the time spent by audit personnel (partners and staff), considering:
Complexity of the audit
Technical knowledge required
Size and nature of the business
A typical charge-out rate is calculated using a multiplier (commonly 3x) of the direct labour cost to ensure fair and sustainable practice operation.
Fees are linked to business size indicators such as:
Gross Turnover
Total Assets
Operating Expenditure
The table below shows a simplified version of the value-based rate structure commonly used by auditors.
| Range | Rate (%) | Cumulative Fee (RM) |
|---|---|---|
| First RM100,000 | 1.000% | RM1,000 |
| Next RM150,000 | 0.438% | RM657 |
| Next RM250,000 | 0.313% | RM783 |
| Next RM500,000 | 0.188% | RM940 |
| Next RM1.5 million | 0.125% | RM1,875 |
| Next RM2.5 million | 0.100% | RM2,500 |
| Next RM5 million | 0.094% | RM4,700 |
| RM10M–RM20M | RM1,000 for every RM1M increment | |
| Above RM20M | Negotiable (min RM20,000) |
Alternatively, if Total Operating Expenditure is more relevant, the following rates may be used.
| Expenditure Range | Rate (%) | Cumulative Fee (RM) |
|---|---|---|
| First RM50,000 | 2.500% | RM1,250 |
| Next RM150,000 | 1.250% | RM1,875 |
| Next RM800,000 | 0.625% | RM5,000 |
| Next RM1,000,000 | 0.250% | RM2,500 |
| Above RM2,000,000 | 0.125% | - |
Audit fees can rise due to inflation and labor shortages—especially in locations like Johor Bahru. Here’s how you can control and reduce your audit costs:
Switching from manual bookkeeping (Excel or handwritten) to a modern, cloud-based accounting system can significantly reduce audit hours.
Well-organized supporting documents minimize time auditors spend searching for evidence, which directly reduces billed hours.
Robust internal controls improve efficiency and reduce auditor workload, resulting in lower audit costs over time.
Train your staff to handle auditor queries effectively. Staff with prior audit experience make the process smoother.
Quick responses to auditor requests prevent delays and reduce the total audit engagement time, leading to cost savings.
Be upfront about any complex or unusual accounting treatments. Early discussions build trust and speed up issue resolution.
Most companies use 31 December as their year-end, causing high demand during audit season. Consider a non-peak financial year-end to benefit from lower rates.
We are a MOF-approved audit firm offering comprehensive statutory audit services for companies across Malaysia, including Sdn. Bhd. entities.
Examination of financial records and transactions
Reporting on internal control deficiencies
Issuing professional audit opinions
Ensuring compliance with Malaysian auditing standards and laws
Contact our team today to get a transparent quote, guidance on fee structures, and actionable tips to optimize your audit cost.
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