DEVELOPMENT OF ACCOUNTING

THEORY IN MALAYSIA

LECTURER:
DR. ROSMILA SENIK

GROUP MEMBERS:
AHMAD SABRI IZZAT BIN RAMLI
ROSMALINDA BT ISMAIL

134918

135047

MOHD SHUKRY BIN MD TAIB

134820

ILY IRYANI ISTIHAR

135272

Introduction
Studies of accounting development in Malaysia more focus on the politics of
multiculturalism. In Malaysia, the meaning and content of development in the 1970 and beyond
is found in the New Economic Policy (NEP) which spells out the twin objectives of socio
economic development for national unity, namely, the eradication of poverty irrespective of race
and the restructuring of society. It is to eliminate racial economic predominance (S.Susila
Dewi, Chapter 5: Economic and Accounting Development in Malaysia, Accounting
Theory and Practice, a Malaysian Perspective. Pg 89-90.). Next, we provide a historical

perspective of economic and accounting in Malaysia, focusing on the role played by the state,
and its relationship to the various group within the economy. Economic policies are incorporated
in the Five Year Development Plans, and the development in accounting as well as the
emergence of interest group and their interaction with the state. Finally, we discuss the
accounting development in Malaysia responded to the stages of economic development and the
functions of the bodies that involve in standard development of accounting. Such as Malaysian
Association of Certified Public Accountant (MACPA), Malaysia Institute of Accountant (MIA),
Financial Reporting Foundation (FRF), and Malaysian Accounting Standard Board (MASB).

Definition of Accounting Theory Development

In accounting perspective, there are many definitions about the accounting theory.
According to Braithwaite,R., 1968, a scientific theory is a deductive system in which observable
consequences logically follow from the conjunction of observed facts with the set of the
fundamental hypothesis of the system. The definition from Popper K, 1968, is emphasizes
empirical nature of the theory rather than logical. Hendriksen, 1970, also find the accounting
theory development is the coherent set of hypothetical, conceptual and pragmatic principles
forming the general framework of reference for a field of inquiry, logical reasoning in the form
of a set board principles. The set of board principal are provide a general framework of reference
by which accounting practices can be evaluated and guide the development of new practices and
procedures. In other perspective, Belkaoui, 2000, accounting theory is a set of interrelated
constructs (concepts), definitions, and propositions that present a systematic view of phenomena
by specifying relations among variables with the purpose of explaining and predicting the
phenomena (www.swlearning.com/accounting/wolk/sixth_edition/powerpoint/ch01.ppt)

Nature of Accounting Theory

The nature of accounting theory is providing a basis for the prediction and explanation of
accounting behavior and events. Many theories arise from different approaches to construction of
accounting theory. In the various images, accounting also known as a ideology, language,
historical record, current economic reality, information system and commodity. There are
explanations in detail about those natures above.
Firstly, accounting as an ideology, the accounting has been perceived as a means of
sustaining and legitimizing the current social, economic and political arrangements, (1) Karl
Marx maintained that accounting perpetuates a form of false consciousness and mystifies rather
than reveals the true nature of social relationships, (2) accounting has been perceived as a myth,
symbol and ritual that permits the creation of a symbolic order within which social agents can
interact, (3) an instrument of economic rationality and a tool of the capitalistic system.

Second, accounting as a language, the accounting is perceived as the language of

business, and according to Hawes, a language has two components, being symbols and
grammatical rules (1) numerals and words and debits and credits are examples of the symbols
unique to accounting (2) in accounting, grammatical rules refer to the general set of procedures
used. Third, is an accounting as a historical record. The accounting records provide a history of
the managers stewardship of the owners resources to measurement of the stewardship concept
has evolved over time, in the periods of pure custodial period, traditional custodial period, assetutilisation period and open-ended period.
Forth, is an accounting as a current economic reality. The balance sheets and income
statements should both be based on economic reality rather than on historical costs. The main
objective of this image of accounting is the determination of true income. Fifth, is an accounting
as a information system. The accounting links an information source or transmitter (usually the
accountant), a channel of communication and a set of receivers (external users). This view of
accounting (1) assumes that the accounting system is the only formal measurement system in the
organisation (2) raises the possibility of designing an optimal accounting system capable of
providing useful information.
Last but least, is an accounting as a commodity. The accounting exists because
specialized information is in demand and accountants are willing and capable of producing it.
There is a market for accounting information with its derived demand and supply.
(www.swlearning.com/accounting/wolk/sixth_edition/powerpoint/ch01.ppt)

The Historical Development of Accounting Theory

Accounting emerged from an oral tradition of stewardship that are responsible for estate
supervision and recognised as the proxy of the ruler over-load. Record keeping was aimed at
maintaining integrity and discovering misappropriation and at his time a party of auditors would
physically check the records against the volumes harvest. Mostly, the record are on clay tablets
dating from 2500BC relating to the Sumerian civilisation showing a series of transaction
concerning grain and considerable attachment to written record keeping at an early stage in
history of accounting. Each party to a transaction would affix their signatures by impressing their
4

seals into the clay tablet. At this time the records were important as they reminded owners of the
quantities of stores held and enabled owners to control the activities of their steward. These
records were quantified in terms of physical volumes rather than currency value.
The earliest double entry records, which have survived are from a bank ledger from
Florence of 1211 and books from Genoa of between 1340-1466, Florence being the hub of a
European banking network and Genoa an overseas trading centre. Thus, progress in accounting
was a consequence rather than a cause of the increased economic activity of the period. Double
entry accounting was obviously superior to single entry because it enable transactions to be
recorded in a more systematic and orderly manner, and by means of a trial balance provided an
arithmetical check on records and a balancing of the books.
In the stage of stagnation only few improvements in accounting technique and in most
societys single entry still dominated record keeping. The reason for the prolonged use of single
entry is most likely due to the small size of business and the relatively a few transaction
involved. The ability of double entry to summaries and report the success or failure of a business
for a specified period of time was not valued at this time. The concept of profit was not regarded
highly an in case would have been flawed without allowances for bad debts, deprecation and
without distinctions between revenue and capital items and private and business expenditures.
The industrial Revolution that occurred in England posed new problems for accounts.
The railway companies were typical of the new enterprises generated by the new industrial and
scientific age. These finance new companies their promoters had to appeal beyond the traditional
extended family connections to unrelated investors. However, in spite of some company failures,
more successful enterprises grappled with new accounting problems of recognition and
measurement. The important are many of the practises accountants use today were determined in
this era as a result of business failure and loss of shareholder confidence. (S.Susila Dewi,
Chapter 5: Economic and Accounting Development in Malaysia, Accounting Theory
and Practice, a Malaysian Perspective. Pg 4-14.)

Economic and Accounting Development in Malaysia

Development in accounting responds to the stages of economic development, but we also
provide a historical perspective of economic and accounting development as well as the role of
the state. Malaysia has pursued an active policy of economic development (consulting economic
growth plus structural, social and economic changes) since its independence from British
colonial rule. (S.Susila Dewi, Chapter 5: Economic and Accounting Development in
Malaysia, Accounting Theory and Practice, A Malaysian Perspective. Pg 91.)

Stages of the Economic Growth in Malaysia

The economic growth of Malaysia is discussed along the stages of the Five Year
Economic Plans. We focus on the role of the state, and hence the discussion will centre on the
role played by the state in each plan period and the interest which appear to dominate. The
Economic Planning Unit of the Ministers Department is the agency responsible for economic
planning in Malaysia. The primary objectives of economic policies are incorporated in the Five
Year Development Plans. The Five Year Economic Plans will be details:
I.

First Five Year Plan (1956-1960)

The First Five Year Plan (FFP) for the federation of Malaya also called the General Plan of

Development was adopted in October 1956. They were years of political progress in the
achievement of Merdeka on 31 August 1957. Economic achievement of the FFP was the rubber
replanting programme.. Structural change in manufacturing sector the main handicraft
industries i.e rattan, attap, clothing, and jewellery, declined in importance relative to the factory
type, capital-intensive industries. The most rapidly growing industries were biscuits, soft drinks,
cement, wood-working and light engineering. This period marked a prominent role by the private
sector and supportive role by the state. These practice had to be changed to accommodate the
states new spending needs and desire to see more industrial development. During this period, the
Malaysia Association of certified Public Accountants (MACPA) was incorporated in 1958 under
the Companies Ordinance 1940-1946 as a self regulatory accountancy body. The principle
objects of the Association are to provide an organization for accountants to advance the status as
well as the theory and practice of accountancy. (S.Susila Dewi, Chapter 5: Economic and
6

Accounting Development in Malaysia, Accounting Theory and Practice, a Malaysian

Perspective. Pg 97.)

II.

Second Five Year Plan (1961-1965)

The plan was adopted in January, 1961. Rural development was the major objective of the

plan. The plan support public utilities and transport, rubber replanting and drainage, but
emphasized education, health, land development and agricultural research and extension
(S.Susila Dewi, Chapter 5: Economic and Accounting Development in Malaysia,
Accounting Theory and Practice, A Malaysian Perspective. Pg 98.)

During this period, MACPA decided to provide a system of training local students. The
MACPA Educational and Training System provided an article ship system of professional
accountancy training. When the MACPA examination were first instituted in 1961, the
Association obtained the assistance of the Overseas Accountancy Examination Advisory Board
(OAEB) established by the Chartered Accountants Joint Standing Committee of the Institute of
Chartered Accountant of Scotland and the Institute of Chartered Accountants in Ireland to ensure
that the MACPA examination was the standard comparable to that of the more well established
accountancy bodies. The OAEBs assistance was terminated in 1970, when the local examiners
had gained sufficient experience from UK counterparts. Since the MACPA examination has been
conducted with the assistance of senior members of the profession and the local institutions of
higher learning

III.

1st Malaysia Plan (1966-1970)

The First Malaysia Plan (19661970) was an economic development plan implemented by

the government of Malaysia. It was the first economic plan for the whole of Malaysia Sabah
and Sarawak included as opposed to just Malaya, which previous economic plans (such as the
Second Malayan Five Year Plan) had confined themselves to. The Plan's objectives were to
promote the welfare of all citizens, and improve the living conditions in rural areas, particularly
among low-income groups. The Plan attempted to increase access to medical facilities in rural
areas through the formation of the Rural Health Service. District hospital facilities were
upgraded to handle referrals from the clinics the Service operated. Medical subcentres were also
founded in urban areas, and by the end of the Plan, the gap between rural and urban areas in
7

terms of quality of healthcare had been narrowed, but not entirely eliminated. East Malaysian
(Sabah and Sarawak) medical facilities in particular were less-well equipped and staffed than
those in West Malaysia (formerly Malaya) ( Henderson, Vreeland, Dana, Hurwitz, Just, Moeller
& Shinn, p. 160, 161). The First Malaysia Plan also had to address the problem of
unemployment, which reared its head for the first time in the 1960s; despite encouraging growth
in the Gross Domestic Product (GDP), employment rates had not grown at a commensurate pace.
In addition, there was also the problem of ethnic specialization in certain professions, with the
Chinese dominating the marketplace, the Malays dominating the civil service, and the Indians
largely participating in specialist professions such as law. The income disparity between rural
and urban areas that the Second Malayan Five Year Plan had sought to resolve was also not
satisfactorily eliminated (Henderson, Vreeland, Dana, Hurwitz, Just, Moeller & Shinn, p. 293.).
The government's ambitious plans to increase the standard of living in rural areas fell short of
their objectives. Limited investment in social capital, despite the various land development
schemes, had failed to either stem the tide of rural-urban migration or raise the incomes of rural
families. In West Malaysia, 90% of all households earning less than M$100 a month were
located in rural areas. The vast majority of these were Malay households (Henderson, Vreeland,
Dana, Hurwitz, Just, Moeller & Shinn, p. 147149.).

IV.

Era of New Economic Policy

The Malaysian New Economic Policy (NEP or DEB for Dasar Ekonomi Baru in Malay),
is an ambitious and controversial socio-economic restructuring affirmative action program
launched by the Malaysian government in 1971 under the then controversial Prime Minister Tun
Abdul Razak. The NEP had the stated goal of poverty eradication and economic restructuring so
as to eliminate the identification of ethnicity with economic function. The initial target was to
move the ratio of economic ownership in Malaysia from a 2.4:33:63 ratio of Bumiputra, Other
Malaysian, Foreigner ownership to a 30:40:30 ratio. This was to be done by redistributing the
wealth to increase the ownership of enterprise by Bumiputras from the then 2.4% to 30% of the
share of national wealth. The 30% target for Bumiputra equity was proposed by Ismail Abdul
Rahman after the government was unable to come to a consensus on an appropriate policy goal
("Snag in policy implementation", pp. 89. (Dec. 31, 2006). In New Straits Times.).
8

The Second Malaysia Plan was an economic development plan introduced by the
government of Malaysia with the goal of implementing the Malaysian New Economic Policy
(NEP) (Shuid, Mahdi & Yunus, Mohd. Fauzi (2001). Malaysian Studies, p. 85.). The Second
Malaysia Plan was regarded by some as excessive in its zeal to increase Malay participation in
the economy, and the government accordingly scaled back the emphasis on restructuring the
economy when the plan ended. Several government agencies that had been established prior to
the advent of the Second Malaysia Plan increased their participation in the economy during the
Second Malaysia Plan. These agencies included the Malaysian Industrial Development Authority
(MIDA) and Majlis Amanah Rakyat (MARA). Several more were also established under the
plan, including the Perbadanan Nasional (PERNAS), or the National Trading Corporation, State
Economic Development Corporation and the Urban Development Authority (UDA).PERNAS
was established to purchase businesses and participate in joint ventures with private companies,
as well as to develop nascent industries to be held in trust until the Malays held sufficient capital
to take them over. By the end of the plan's tenure, PERNAS owned 100% of eight companies
involved in insurance, trading, construction, properties, engineering, securities, and mining. Joint
ventures had also been formed with the private sector to develop the mining, containerization,
tourism and consulting industries. ( Henderson, et al., p. 322.). The Second Malaysia Plan aimed
to modernise Malaysian railroads, which the government regarded as crucial to development and
industry. All trains were converted to use the more efficient diesel fuel, and the government
increased allocations for maintenance and modernisation of the rail infrastructure. In particular,
emphasis was placed on upgrading existing rolling stock, roadbeds, and repair facilities.
(Henderson, et al., p. 29). At the end of the Second Malaysia Plan, the poverty rate was found to
have declined from 49% to 43%. Unemployment improved slightly, decreasing from 7.5% to
7.4%. Great strides were made in increasing Bumiputra involvement in the private sector,
however; the employment rate of Bumiputra in the manufacturing sector increased from 29% to
33%, and from 24% to 34% in the commercial sector. Bumiputra equity ownership more than
doubled from 3% to 7.8%. However, this was considered unsatisfactory by many, especially as
much of the progress had been made by government enterprises holding the equity in trust
(Henderson, et al., pp. 295296.).
i

Setting up the Kuala Lumpur Stock Exchange (KLSE) (1974)

9

The Kuala Lumpur Stock Exchange (KLSE) started as a nucleus of four stockbrokers under
the direction and the assistance of the Central Bank in May 1960. In 1964, it was renamed the
Malayan Stock Exchange, and then the Stock Exchange of Malaysia and Singapore in 1965 and
in 1973, the Kuala Lumpur Stock Exchange. MACPA had accepted the responsibility for
expanding on the financial statement disclosure requirement of the Malaysian Companies Act.
Their recommendations were incorporated in Statement No 1 Recommendation on the
Presentation of Account issued in June, 1972. Professor Mitchell commented that it was an
initial step in the long march of progress. He noted that the recommendation was silent or
equivocal on many accounting issues which had been resolved in other countries. He highlighted
that, as at 30 November, 1973, several foreign companies were listed on the KLSE, and the total
market value of these companies accounted for approximately sixty percent of the total market
value of listed companies. Additionally, he noted, a number of non-listed companies operated in
Malaysia as subsidiaries of multinational companies. In view of the international nature of its
commercial and financial affars, he pointed out that Malaysia must seriously consider
international accounting standards when recommending corporate reporting practices (S.Susila
Dewi, Chapter 5: Economic and Accounting Development in Malaysia, Accounting
Theory and Practice, a Malaysian Perspective. Pg 107.)

ii

Adaption of international Accounting Standard (IAS) (1979)

In 1978, IAS 1 to 4 was adopted by MACPA. IAS 5 to 10 was adopted in 1979. At a seminar

organized by MACPA IN 1980, the Deputy Governor of Bank Negara said opening address:
The International Accounting Standard are important to all of us...there is great need for all
people who hold a position of trust of members of the public such as directors of companies,
banks and finance houses, to understand and apply these standard so that they many fulfill
their duty of public accountability better, more consistently and in a more meaningful way
(S.Susila Dewi, Chapter 5: Economic and Accounting Development in Malaysia,
Accounting Theory and Practice, A Malaysian Perspective. Pg 108.)

iii

Close Rapport with the State (1979-1986)

10

In 1979, at the request of the Director-General of Insurance, an insurance committee was

formed by MACPA, which aimed to clarify the various technical problems on auditing and
accounting standard in the insurance industry. This committee was see to be active in the 1980
after the regulation of the insurance industry was taken over by the Central Bank (MACPA,
1989). The accounting profession at the stage was seen to be solely represented by MACPA as
seen from the various activities that were involved in. It was actively organizing seminars and
talks during this period, and there was general support from top leaders (S.Susila Dewi,
Chapter 5: Economic and Accounting Development in Malaysia, Accounting Theory
and Practice, a Malaysian Perspective. Pg 108-109. ).

iv

Politico - Economic Perspective A Summary of Development In the Seventies

In Malaysia, Bumiputra participation in the professions and private sector increased as well,

although Bumiputras remain somewhat under-represented. Between 1970 and 1990, the
Bumiputra share of accountants doubled from 7 to 14 per cent, engineers from 7 to 35 per cent,
doctors from 4 per cent to 28 per cent, and architects from 4 to 24 per cent. The Bumiputra
portion of the share market a figure frequently cited as "a measurement of overall community
wealth", despite claims that it was misleading increased from 2 to 20 per cent over the same
period according to one academic's measurements. The Chinese share also increased from 37 to
46 per cent, at the expense of foreign participation. Official Kuala Lumpur Stock Exchange
figures from 1998 were even more optimistic, indicating Bumiputra share ownership stood at
28.6% in 1990 and 36.7% in 1996 (Funston, John (2001). ("Malaysia: Developmental State
Challenged". In Government and Politics in Southeast Asia, p. 201). Thus, Cooper and Sherer
(1984) have pointed out that a political economy of accounting is useful for understanding how
the accounting process interacts with its social, economic and political environments. They write
(p. 208):
... The objectives of and for accounting are fundamentally contested, arises out of
recognition that any accounting contains a representation of a specific social and political
context. Not only is accounting policy essentially political in that it derives from the
political struggle in society as a whole but also the outcomes of accounting policy are
essentially political in that they operate for the benefit of some groups in society and to

11

the detriment of other... (Azham Md. Ali, (4 to 6 July 2004), In journal The Post-New
Economic Policy (NEP) Era)

V.

4th Malaysia Plan (1981-1985)

In November 1981, the MACPA Educational Trust Fund was established with the objective
of promoting and advancing education and research in accountancy. Between 1982-1984, 5
technical Bulletins (TBS) were issued to cover areas not governed by the IAS S. Along with the
developments in the corporate sector and the increased acceptance of IASS, the Association was
actively involved in discussions with the Registrar of Companies in suggesting further
disclosures for financial reporting by companies (MACPA, 1983, P. 20 in S.Susila Dewi text
book). In 1984, the companies Act 1965, was amended, to include the definition of account to
mean Profit and Loss account and Balance Sheet, and including notes or statements required by
the Act and attached or intended to be read with Profit and Loss or Balance Sheet. In 1984 also,
Malaysian Accounting Standard 1 was issued in respect of Earning per Share. Issuance of
Malaysian Accounting Standard (MASS) cover issues which are not covered by the IAS or which
need to be separately addressed in the context of the Malaysian environment. Further, to promote
interest in corporate financial reporting, MACPA jointly organized with the Malaysian Institute
of Management, the first Malaysian Annual Corporate Report Award Competition in March,
1985 ((MACPA, 1986). (S.Susila Dewi, Chapter 5: Economic and Accounting
Development in Malaysia, Accounting Theory and Practice, A Malaysian Perspective.
Pg 110.)

VI.

5th Malaysia Plan (1986-1990)

In the period of Fifth Malaysia Plan, we can see the speeding up of the privatization efforts as
well as reduced involvement of the public sector in productive activities that competed directly
12

with the private sector. In the 1980s also can see the active development of small and mediumscale industries (SMIs). This is to promote industrial deepening and inter-industry linkages, sees
as a vital link in the national industrialization drive.
In issue of privatization, there are five main objectives that may involve. These objectives
were issued by the Economic Planning Unit. The objectives are to relieve the financial and
administrative burden of the Government, to facilitate the implementation of the privatization
programme, to encourage the Chinese business sector (Jesudason, 1990, p.162 in S.Susila Dewi,
Chapter 5: Economic and Accounting Development in Malaysia, Accounting Theory and
Practice, A Malaysian Perspective. Pg 112-113.)
In 1986, the Registrar of Companies does the amendments to the Companies Act, 1965, in
the Ninth Schedule. The addition, there also introduced the Statement of Changes in Financial
position. (S.Susila Dewi, Chapter 5: Economic and Accounting Development in Malaysia,
Accounting Theory and Practice, A Malaysian Perspective. Pg 113.)
In the year 1987, Malaysia Institute Accountant (MIA) was activated. The MIA is in short
supposed to be the body to promote and regulate the accounting profession in the country.
(Azham Md Ali, Accounting In Malaysia In The Post-New Economic Policy (Nep) Era, Pg. 5-6.
MIA also can describe as a statutory body that responsible to regulate the accountancy profession
in Malaysia. MIA exerts import influence on all accountants in Malaysia. Beside that, the MIA
sets the professional requirements for accountants, conducts the research, and publishes materials
on many different subjects related to accounting auditing, attestation and assurance services,
management consulting services and taxes. In directly, MIA function was to be tract down the
bogus accountants. That is the accountants, who are not registered with MIA and also who the
providing accounting services. In other hand, MIA also one of the enforcer to the accounting
standard in Malaysia, that made sure the all companies and organization follow the standard.
(MIA, 1987 in S. Susila Dewi TextBook, Pg. 113.)
MIA also decided to set up the Malaysian Association of accounting Technicians
(MAAT). This is to provide a pool of accounting technicians to support MIAs members and also
to provide a qualification and organization for such persons. MAAt is the second-tier
13

accountancy body that sponsored by the Institute. (S.Susila Dewi, Chapter 5: Economic and
Accounting Development in Malaysia, Accounting Theory and Practice, A Malaysian
Perspective. Pg 113.)

VII.

6th Malaysia Plan (1991-1995)

In this Sixth Malaysia Plan, were the first phases in the implementation of the Second outline

Perspective Plan (OPP2), 1991-2000. The OPP2 set the board objectives, targets and the
strategies that will guide the development of the nation in the nineties. The plan also emphasized
measures to accelerate industrial restructuring, technological upgrading, human resource
development and industrial linkages to ensure a greater and higher level of domestic value-added
contribution to growth. Beside that, the developments of capital market also happen. It arise the
issues of privatization. It more clear when to strengthening the financial position of the
government and the acceleration of the privatization programme reduced the borrowing
requirements of the public sector.
Government also introduced measures to enhance the development of the capital market;
there is the Securities Commission (SC). It was set up in 1993. Their functions are to safeguard
the interests of the investing public and minority shareholders. There also have the act, The
Future Industry Act, 1993, that provided legal framework to safeguard investor. From this,
Commission also issued the standard that must the companies follow. Besides that, Securities
Commission also the enforcer for the accounting standard in Malaysia.
In year 1991, the Malaysian Institute of Taxation (MIT) set up by MIA. It incorporated under
Companies Act 1965. The main objectives of MIT are providing an organization concerned with
taxation matters in Malaysia. It also is advancing the status and interests of the taxation
profession. In this Sixth Malaysia Plan, we also can look how important the role of insurance
industry. It exists, when the MIA and MACPA issued Malaysian Accounting Standards (MASs)
for insurance. For the year 1992, MACPA was establishing the first MACPA Guideline for
Accounting in Public Sector, issued in January. (S.Susila Dewi, Chapter 5: Economic and
Accounting Development in Malaysia, Accounting Theory and Practice, A Malaysian
Perspective. Pg 113-116.)
14

VIII.

7th Malaysia Plan (1996-2000)

The launching of the Seventh Malaysia Plan, 1996-2000, the Malaysian economy will enter

the second phase of the Second Outline Perspective Plan (OPP2), 1991-2000. The Seventh Plan
period preserts an important phase for charting new courses and strategies to face future
challenges. The major challenges will be to provide sufficient skilled workers, promote capital
deepening and create a more technology-oriented culture to effect the structural transformation
towards a productivity-driven economy as well as embark on word-scale operation. It will build
on the strengths and achievement attained so far. Besides that, it also enhances a potential output
growth. The important things, there also did the promotion of a more viable bumiputera
commercial and industrial community by encouraging their participation in strategic. A number
of strategies will be formulated to meet these challenges. This will strengthen the ability to
pursue the fundamental policy of achieving balanced development and national unity, as
envisaged in the NDP. (Chapter 1: Seventh Malaysia Plan, pg 30-31)
IX.

8th Malaysia Plan (2001-2005)

The Eighth Malaysia Plan, covering the period 2001-2005, is the first phase in the

implementation of the Third Outline Perspective Plan (OPP3), 2001- 2010. The OPP3, which
embodies the National Vision Policy (NVP), will chart the development of the nation in the first
decade of the 21st century. The Eighth Plan will incorporate the strategies, programmes and
projects designed to achieve the NVP objectives of sustainable growth and strengthen economic
resilience as well as create a united and equitable society.
The key strategies during the Plan period as pursuing sound macroeconomic management,
and ensuring prudent fiscal and monetary policies as well as enhancing efforts to develop a
knowledge based economy; strengthening and streamlining distributional strategies and
programmes to ensure balanced participation among and within ethnic and income groups as
well as regions; enhancing productivity growth through improvement in workers knowledge,
skills and expertise as well as upgrading of R&D and science and technology (S&T); increasing
competitiveness and economic resilience through accelerating the shift of the key economic
sectors towards more efficient production processes and high value-added activities; expanding
the usage of ICT within and across sectors to accelerate the growth process; strengthening the
15

human resource base to ensure the availability of manpower with higher levels of knowledge,
technical and thinking skills; adopting an integrated and holistic approach in addressing
environmental and resource issues to attain sustainable development; enhancing further the
quality of life through improving accessibility to social services as well as developing the
aesthetic aspects of life; and intensifying efforts to nurture and inculcate positive values and
attributes among Malaysians through the education system, social and religious organizations
and the media. (Chapter 1: Eighth Malaysia Plan, pg 1-6.)
X.

9th Malaysia Plan (2006-2010)

The Ninth Plan re-examines the policies and strategies that were put in place, proposes
changes in the development approaches, and introduces new policy initiatives. As the first step,
the achievement of the Ninth Plans policies and strategies is critical to the realisation of the
National Mission. Determined and focused implementation of the Plan will strengthen the
foundation of the country, build upon Malaysias past achievements, focus the countrys efforts
on the five key thrusts of the National Mission, and ultimately pave the way for Malaysias
smooth progression towards becoming a developed nation by 2020. (Chapter 1: Ninth Malaysia
Plan, pg 43.)

16

The Development of Accounting Theory in Malaysia

The Development of Accounting Theory in Malaysian context, the impact for the
regulation from British during in Malaysia in their colonialist - Company Ordinance 1915. From
this, exists other law, acts and related parties. Such as Companies Acts 1965-Sec. 167, 169,
Schedule IX, Security Industries Act 1983, Financial Report Act 1997, Capital Issues Committee
(1968), BNM, KLSE, MIA, MACPA. This explanation for the key players of the enforcer the
accounting standard:
i.

Central Bank (Bank Negara Malaysia)

Bank Negara Malaysia is the central bank for Malaysia. It was establish on 26 January 1959

under the central bank of Malaya Ordinance, 1958. The main objectives are to issue currency and
keep reserves safeguarding the value of the currency, act as a banker and financial adviser to the
Government, promote monetary stability and a sound financial structure and influence the credit
situation to the advantage of the country.
ii.

Securities Commission (SC)

The Securities Commission was set up under the Securities Commission Act 1993. The

function of the Securities Commission is to promote a strong and healthy securities market. It is
also to maintain the confidence of investors such as to supervising exchange, clearing houses and
central depositories, registering authority for prospectuses of corporation other than unlisted
recreational clubs, approving authority for corporate bond issue, licensing and supervising all
licensed persons, encouraging self regulation and ensuring proper conduct of market institution
and licence persons.
iii.

The Companies Commission of Malaysia (CCM)

The CCM

function of Integrates the activities of the former of ROC & ROB, ensures

Identifies issues that impact the FR environment, enhancement & promotion of the supply of
business and corporate information, acting as agent of the Government & providing services in
collecting & enforcing payment of prescribed fees, regulating matters relating to corporations,
companies & businesses and encouraging & promoting proper conduct amongst directors,
secretaries & other officers of a corporation
17

It also regulate some bodies for the standard development, like, (1) IASC-1973, since
1985-MF directed MIA & MACPA to follow IAS, (2) FRF-1997-advisory bodies or sponsor for
committee to develop standards, (3) MASB-1997- the authority body to make the effort for
standard development in Malaysia. This is an explanation and function of the several bodies of
the standard development:
i.

Financial Reporting Act 1997 (FRF)

The Financial Reporting Act 1997 was gazetted on March, 1997. The Financial Reporting

Foundation (FRF) is established under the Financial Reporting Act 1997 (Act). The functions
and powers of the FRF as provided under the Act are as follows to provide its views to the
MASB on any matter which the MASB seek to undertake or implement with respect to the
development and issue of accounting standard and a conceptual framework, to review the
performance of the MASB, to be responsible for the financing arrangement and operation of the
MASB, to approve the MASB budget and to engage or to employ persons and determine the
conditions of such appointments as are necessary to assist the FRF and MASB perform their
function under the Act, to administer the fund established to finance the ongoing operation of
FRF and MASB including management of funds not expanded on operations during any period,
to maintain proper accounts and prepare an annual statement of accounts of the FRF, to appoint
an auditor for the purpose of auditing the annual statement of accounts, to forward the annual
statement of accounts and audit report to the Minister of Finance, and report on the activities of
the FRF and MASB at the end of each financial year and to perform such other functions as the
Minister of Finance may prescribe. The FRF provides Accounting standard is defined as
statement of standard accounting practices used for the preparation of financial statements.
Approved accounting standard means accounting standard (Chapter 5 in S.Susila Dewi text
book)

ii.

Malaysian Association of Certified Public Accountant (MACPA)

18

Malaysian Association of Certified Public Accountant (MACPA) was incorporated in 1958

under the Companies Ordinance 1940 1946 as a self-regulatory accountancy body. The
principle objects of the Association are to provide an organization for accountant advance the
status as well as the theory and practice of accountancy. The Association undertook
responsibility of developing and promulgating a set of accounting, auditing and ethical standards.
The Association was the first to institute a system of training and examination leading to a
professional accountancy qualification in Malaysia (MACPA, 1993). During this period that
MACPA decided to provide a system of training local student. The MACPA Educational and
Training System provided an articleship system of professional accounting training. When the
MACPA examination where first instituted in 1991, the Association obtained the assistant of the
Overseas Accountancy Examination Advisory Board (OAEB) established by the Chartered
Accountant Joint Standing Committee of the Institute of Chartered Accountants in England and
Wales, the Institute Chartered Accountants of Scotland and the Institute Chartered Accountants in
Ireland to ensure that the MACPA examination was of the standard comparable to that of the
more well established accountancy bodies. The OAEBs assistance was terminated in 1970,
when the local examiners had gained sufficient experience from their UK counterparts. Since
then, the MACPA examination has been conducted with the assistance of seniors members of
the profession and the local institution of higher learning.

iii.

Malaysia Institute of Accountant (MIA)

MIA was activated in 1987. The Malaysia Institute of Accountant (MIA) is a statutory body

responsible to regulate the accountancy profession in Malaysia. MIA exerts import influence on
all accountants in Malaysia. Membership in the MIA gives the designation Chartered
Accountant. Public accounting firm provide oversight of individual firm members, but more
formal regulation is enforced by the Malaysian Institute of Accountant via the professional
accountancy bodies.

The Act provides that only registered members of the MIA can hold themselves out as
accountants. With the amendments of 2002, membership in MIA is divided into 4 categories:
19

Chartered Accountants in Practice

Chartered Accountants Not in Practice
Associate Members
Licensed Accountants

MIA sets professional requirements for accountants, conducts research, and publishes materials
on many different subjects related to accounting, auditing, attestation and assurance services,
management consulting services and taxes.

iv.

Malaysian Accounting Standard Board (MASB)

The Financial Reporting Act 1997 establishes the Malaysian Accounting Standard Board
(MASB). (MASB) as an independent authority to develop and issue accounting and financial
reporting standards in Malaysia. The main function of the MASB are to issue new accounting
standard as approved accounting standard, issue statements of principles for financial reporting,
develop a conceptual framework for the purpose of evaluating proposed accounting standards
and make such changes to the form and content of proposed accounting standard as it consider
necessary, review, advise or adopt as approved accounting standard and conduct such public
consultation as may be necessary in order to determine the contents of accounting concept,
principle and standard. The MASB, together with the FRF, make up the framework for financial
reporting in Malaysia. This framework comprises an independent standard-setting structure with
representation from all relevant parties in the standard-setting process, including preparers, users,
regulators and the accountancy profession (Chapter 5 in S.Susila Dewi text book)

20

Conclusion
The discussions illustrate that accounting development in Malaysia responded to the
stages of economic development. We can see that accounting is coming full circle. In the early
days, accounting was integrated into the social and political life until it became narrowly focused
in the economic domain with the growth of large corporations and the dominance utilitarian
economics In the development of accounting in Malaysia, involve many bodies that play their
own functions separately. These studies saw the need for the State to intervene on behalf of
national economic rationality against the short term pro In Malaysia, the state was relatively
autonomous from the dominant foreign and Chinese business group, but the pressures for
political support building are seen to motivate the state into creating a new Malay business and
managerial class. fit interest of the private sector. This also responds to stages of economy
development from 1956 1995. The socio-economic and political conditions appear to have
implications for accounting regulation in Malaysia. The impact of this situation, accounting
standard that we use until now exist.

21

References

S.Susila Dewi, Keith Hooper, Howard Davey, Accounting Theory and Practice, A

Malaysian perspective
Azham Md. Ali,( 4 to 6 July 2004) Accounting In Malaysia, In Journal The Post-New
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