MONASH

BUSINESS

Introduction to Accounting &

The regulatory framework for reporting

Accredited by: Advanced Signatory:

LEARNING OBJECTIVES
At the end of this lecture, you should be able to:
1. Explain the nature and role of accounting
2. List the main groups of users of accounting reports and describe their
needs for accounting information
3. Recognize the main financial reports
4. Compare and contrast financial and management accounting
5. List the relevant regulatory bodies which oversight the financial
reporting in Malaysia
6. Explain the role of these regulatory bodies with regard to
financial reporting, particularly reference to corporate
governance
NATURE AND ROLE OF ACCOUNTING

• Accounting is concerned with the collection, analysis

and communication of economic information

• Accounting information is useful to those who need

maketo decisions and plans about businesses, and
for those who control those businesses

• Examples of decisions made by businesses include

increase product pricing, cutting product costing, new
investment and hiring employees.
ACCOUNTING AS AN INFORMATION
SYSTEM
• Accounting can be seen as an important part of the
total information system for a business
NATURE AND ROLE OF ACCOUNTING
Accounting fulfils two roles:

• Decision usefulness – Assisting users with making

informed choices about issues, e.g. resource allocation

• Stewardship – traditional role of providing

accountability reports of transactions for a given
period. To report on how management has taken care
of a company’s resources.
USERS OF ACCOUNTING
INFORMATION
FINANCIAL ACCOUNTING
• the recording of financial transactions, aimed principally at
reporting performance to those outside the
organization, with a primary focus on shareholders
• Annual Report to shareholders, which comprises
• Statement of financial performance (Income statement) –
shows how much profit has been generated in a period

• Statement of financial position (Balance Sheet) – shows

financial position at the end of a period

• Statement of cash flows – shows sources and uses of cash

during a period

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INCOME STATEMENT
BALANCE SHEET
STATEMENT OF CASH FLOWS
MANAGEMENT ACCOUNTING
Provides financial and non-financial information to:

1. Plan for future - develop and implement strategy

(budgeting);
2. Making decisions - about products, services, prices
and what costs to incur (decision-making);
3. Implementing the plan and to achieve targets
(control).

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FINANCIAL AND MANAGEMENT
ACCOUNTING

Financial accounting Management accounting

Nature of reports General purpose Specific purpose

Level of detail Broad overview Detailed
Accounting standards No restrictions
Restrictions and other
regulations (Chapter
5)
Reporting interval Mainly semi-annual or Whenever required, often
annual weekly or monthly
Time horizon Mainly historical Both past and future
Range of Quantifiable in money Can contain non-financial
information terms; focus on information; less focus on
objective and verifiable objectivity and
data verifiability
THE REGULATORY FRAMEWORK
 Financial Reporting System in Malaysia

Front-line regulators

7/18/2021 14
FINANCIAL ACCOUNTING
• Legislations
• Companies Act 1965
• Bursa Malaysia Listing Requirements.

• Accounting standards
• Malaysian Accounting Standards Board (MASB)

• Statutory/Independentaudits
• Malaysian Code of Corporate
Governance (MCCG)
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COMPANIES ACT 1965
• The financial statements of a company are the responsibility of
directors, not managers or auditors.
• Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy the financial
position of the company at any time and to ensure that
financial statements comply with the Act.
• They are also responsible for safeguarding the company’s
assets and for taking reasonable steps to prevent and detect
fraud.

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Companies Act
Bursa Malaysia Listing Rules
• Stock Exchanges provide a market for buyers and sellers
• Listing Rules set out mandatory standards for any company wishing
to list its shares or securities for sale to the public
• Listing Rules are aimed at protecting investors and maintaining
standards of transparency, conduct, shareholder rights and due
diligence.
• Rules cover, for example:
– A listed company shall issue the annual audited accounts within 4 months
after the close of a financial year.
– The information that need to be included in the annual accounts
17
Pasdec publicly reprimanded for failure to submit annual report
in time
https://www.theedgemarkets.com/article/pasdec-publicly-reprimanded-failure-
submit-annual-report-time
Role of Accounting Standards
• Accounting standards provide proper and consistent
accounting practice for benefit of preparers and auditors
• Quality and usefulness of financial statements are dependent
on accounting standards applied to prepare them
• MASB’s role to issue accounting standards

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 Statutory Audit
• A periodic examination of the accounting records of a company
carried out by an independent accountant to ensure that those
records have been properly maintained and that the financial
statements which are drawn up from those records present a true
and fair view.
• Auditors provide an opinion on the financial statements, whether,
in their opinion, the accounting statements of a company show a
true and fair view, and comply with statutory and accounting
standard requirements
• Appointed by the directors and report to the shareholders
20
Auditors raise doubts on Scomi’s business ability due to ongoing disputes
http://www.thestar.com.my/business/business-news/2017/07/25/auditors-raise-doubts-on-scomis-
business-ability-due-to-ongoing-disputes/#z2kyesFRKBowvKHV.03
Malaysian code of corporate
governance
• Corporate governance means the system by which corporations
are directed and controlled.

• MCCG Principle 5: Uphold integrity in financial reporting

• The Audit Committee should ensure financial statements

comply with applicable financial reporting standards.

• The Audit Committee should have policies and procedures to

assess the suitability and independence of external
auditors

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 The regulatory framework of
reporting

Companies act Stock exchange

Businesses
Corporate (Financial reports) Statutory audit
governance

Accounting standards
 Corporate governance

• One of a critical agent in the regulatory framework of reporting

• Malaysian Code of Corporate Governance (MCCG)
https://www.sc.com.my/api/documentms/download.ashx?id=
70a5568b-1937-4d2b-8cbf-3aefed112c0a
• Public listed companies are required to adopt the principles in
the MCCG
• Malaysia Institute of Corporate Governance (MICG) – to
promote and encourage corporate governance development,
provide education and training for the benefit of its members
and other interested institutions or bodies in Malaysia.
http://www.micg.org.my/