If the LHDN decides to audit a company, the worst nightmare of most business owners may come true. To avoid this, the companies should engage an audit firm in Johor Bahru to perform financial audits (Also see Benefits a Simple Financial Analysis Can Bring to Your Business) to make sure that they have done the records correctly without having material misstatements. The business owners should know the consequences they may need to face if the LHDN find them and if they are in an unfavourable situation. They need to know the actions that the authorities may take against them and what they can do to protect themselves.

Correspondence Audit

This type of audit (Also see Introduction to Audit) is the mildest that the LHDN may conduct. In the beginning, the business owner may receive a letter which asks for documents which are missing from what they have submitted. They may mail the necessary documents and let the LHDN determine whether they have done the income claims and deductions correctly.

If the business owners (Also see 6 Accounting Tips For New Business Owners) have the documents and they mail it, the worst-case scenario is that they owe more tax than they thought, and they may owe tax interests on their unpaid tax. If they do not own those necessary documents, the LHDN may take a more in-depth audit.

Office Audit

If the LHDN wants the business owners to report to its office physically, an office audit (Also see Introduction to Pre-audit) is taking place. Typically, this means the LHDN thinks that some of their deductions are a lot higher than usual. What the business owners should do is to bring the necessary documents to the LHDN office nearby and let the officers determine whether their claims are reasonable. The worst thing that may occur is they owe more taxes with possible fines, or they do not own those documents. In this case, the LHDN may take more extensive actions and look into their tax return.

Field Audit

The LHDN officers will come to the place the business owners run their business to run a field audit. The officers may examine the accounting records of their company. Also, business owners need to be prepared that the audit scope is extensive, and it may include things that the LHDN have not mentioned before. If the LHDN found out that the bookkeeping records are suspicious, the worst-case scenario can be the LHDN fines the business heavily and place a lien against it, which means that the company should pay the LHDN before it can pay to its creditors. If the LHDN found out that the business owner has committed tax fraud, he or she may be subjected to prosecution, which may cause the business owner to be in jail.