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A Third Party Confirmation Audit agreement is a specialized legal document that formalizes the relationship between an audit firm and a client company when independent verification of specific information is required for external stakeholders. Under Malaysian law, these agreements are crucial for ensuring that audit procedures meet regulatory standards while protecting all parties involved in the confirmation process.

When do you need this document?

You need a Third Party Confirmation Audit agreement when external parties require independent verification of your company's information. Banks often request confirmation audits before approving significant loans or credit facilities, verifying your financial statements and cash balances. Regulatory bodies may require confirmation audits to verify compliance with specific industry requirements or licensing conditions. Business partners frequently request these audits before entering into joint ventures or major commercial agreements to confirm your operational capacity and financial stability. Additionally, you may need this agreement when preparing for mergers and acquisitions, where potential buyers require independent confirmation of key business metrics and compliance status.

Key legal considerations

The agreement must clearly define the scope of services to prevent misunderstandings about what will be confirmed and verified. You should specify the exact information or statements requiring confirmation, the methodology to be used, and the format of the final report. Confidentiality clauses are essential given the sensitive nature of business information being verified, particularly considering the Personal Data Protection Act 2010 requirements for handling personal and commercial data. The document should establish clear timelines for completion and delivery of confirmation results. Professional indemnity and liability limitations must be addressed to protect both the audit firm and your company from potential claims arising from the confirmation process. Payment terms and fee structures should be explicitly stated, including any additional costs for extended procedures or multiple confirmation requests.

Legal requirements in Malaysia

Under the Companies Act 2016, any audit firm conducting confirmation audits must be properly licensed and registered with the Malaysian Institute of Accountants. The agreement must ensure compliance with Malaysian Approved Standards on Auditing, which align with International Standards on Auditing but include specific local requirements and interpretations. Your company directors and secretary must provide necessary cooperation and access to records as required under the Act. The audit firm must maintain independence standards as prescribed by the Accountants Act 1967 and cannot have any conflicts of interest that might compromise the integrity of the confirmation process. Documentation and record-keeping requirements must meet Malaysian regulatory standards, with appropriate retention periods for audit working papers and confirmation evidence. The final confirmation report must be prepared in accordance with professional standards and clearly state any limitations or qualifications in the audit scope.