The accountancy profession in Malta is regulated by the Accountancy Profession Act.

The Accountancy Board is appointed by the Minister of Finance, the Economy and Investment and made up of a chairman and six other members, at least three of whom must be in possession of the warrant of certified public accountant.

The Board regulates all aspects of the profession, including advising the Government on the approval of accounting and auditing standards, procedures, practices, and ethics and on the issue of guidelines and other services to practitioners.

Accounting Records

The Malta Companies Act requires every company to keep proper accounting records for the following:

• All sums of money received and expended by the company, and details of the receipts and expenditure.
• The assets and liabilities of the company.
• If the company’s business involves dealing in goods, further statements and records including, amongst others, statements of stocks held by the company at the end of each accounting period

Filing of financial statements and reports

Malta Companies are obliged to deliver to the Malta Business Registry a copy of the annual financial statements presented to the shareholders in the general meeting and, if applicable, of the directors’ and the auditors’ reports within 42 days from the end of the period for submitting annual financial statements to the general meeting. Small private exempt Malta companies are allowed to exclude the income statement from the financial statements.

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In terms of GAPSME, the presentation of primary statements for small entities is limited. Furthermore, GAPSME also limits small entities’ disclosures in the notes to the financial statements. For further details, please refer to the form and content of financial statements section below.

Audit reports and audit requirements

Generally, all limited liability companies registered in Malta are required to prepare a set of audited financial statements every year. The auditors of a Malta company are required by the Malta Companies Act to make a report to the shareholders on the annual accounts audited by them, which is furnished to the shareholders in advance of the annual general meeting.

The audit report states whether, in the auditors’ opinion, the accounts have been properly prepared in accordance with the Companies Act and whether they give a true and fair view of the financial position, financial performance and cash flows of the company in accordance with GAPSME or IFRSs as adopted by the EU, as applicable.

The auditor’s opinion shall be either unqualified, qualified or an adverse opinion.

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Audit Exemptions in Malta (Companies Act)

The Companies Act exempts a Maltese limited liability company from the requirement of having its annual accounts audited in respect of its first two accounting periods if all the following criteria are satisfied:

• The annual turnover of the company does not exceed eighty-thousand euro (€80,000) or a pro-rata amount if the relevant accounting period is a period other than twelve months.
• All shareholders of the company are qualifying shareholders.
• An application is made to the Registrar within six months from of the end of the relevant accounting period in a prescribed format.

 Auditing in Malta

Notwithstanding the exemption prescribed by the Companies Act, for income tax purposes, all Malta companies need to be audited by a Maltese registered auditor.

The legal basis for such statutory auditing requirement in Malta is Article 19(4) of the Income Tax Management Act which states:

“records required to be kept shall be supported by such documents as may be appropriate in the circumstances, including, in  the  case  of  a  company  registered  in  Malta,  the balance sheet and profit and loss account, which shall comply with the provisions of the Companies Act and notwithstanding any exemption made by that Act, such balance sheet and profit and loss account shall be accompanied by a report made out by a certified public auditor as provided by the applicable provisions of that same Act”.

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Financial Audit versus Internal Audit

A financial audit is an objective examination and evaluation of the financial statements of an organization to make sure that the financial statements are a fair and accurate representation of the transactions they claim to represent.

Financial audit is a statutory requirement in Malta for every limited liability company.

A financial audit is carried out by an audit firm or an individual in possession of warrant to act as certified public accountant.

An internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations.

It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Internal audit is not a statutory obligation for all Maltese companies.

Typically, all companies licensed by the Malta Financial Service Authority are required to conduct an internal audit on a periodic basis. Larger entities are also required to have an internal audit committee.

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Internal Audit

The role of internal audit is to provide independent assurance that an organisation’s risk management, governance and internal control processes are operating effectively.

Internal audit is designed to add value and improve organisational operations. Unlike a financial audit, an internal audit looks beyond the financial risks and considers wider issues such as the organization’s reputation, growth, the impact on the environment and the way it treats its employees.

The ever-increasing regulations and expansion of organisations across the globe into new markets exposed the organisations to greater regulatory and compliance risks.

An effective internal audit helps accomplish business objectives by bringing a systematic, disciplined approach to the evaluation and improvement of the effectiveness of risk management, control, and governance processes. Having an internal audit which is effective, dynamic and capable of responding to key challenges is fundamental to a successful organisation.

An internal audit is also critical for monitoring and safeguarding an entity’s most valuable assets from any potential threats.

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