Importance Of Accounting Standards In Malaysia

Accounting is an important part of businesses as it is supporting the financial stability of a business. It is also the process of keeping track of the finances of a business through its financial transactions. The Malaysian Accounting Standards Board was established in 1997 with objective of improving the quality of external financial reporting in Malaysia. Previously, two professional bodies, the Malaysian Institute of Accountants (MIA) and the Malaysian Institute of Certified Public Accountants (MICPA) carried out the task of setting accounting standards in Malaysia to investigate the standard setting arrangements in Malaysia and the roles of the accounting profession in the standard setting process from year 1997 to 1999. Documentary analysis

Generally, all agreed to have an independent body to develop the accounting standards in Malaysia. They viewed that with various inputs put into the standard setting process, and a strong legal backup for the enforcement of the standards, the MASB has done a pretty good job. The professional bodies, MIA and MICPA and the accounting profession as a whole could be said to be important players in the standard setting process still even though the job is solely rest on the MASB shoulder. The accounting profession made up the majority members on the Malaysian Financial Reporting Foundation (FRF) and the MASB. They also involved in the Working Groups set up by the MASB to carry out the development of accounting standards, contributed actively for the comments on the discussion documents and exposure drafts issued by the MASB, and participated in standard setting at the international level. The MIA and MACPA also provide interpretations and guidelines on how to apply the approved accounting standards to the accountant

Diga, 1997). Then, as the country grows in its importance to investors, demands on information about the country would increase. As financial reporting is one of the main requirement to obtain information for the parties directly or indirectly involved in the capital market, an improvement in the reporting could promote the capital market more for potential investors. Internally, the Malaysian government is also concerned about the establishment of good reporting practices by companies in Malaysia especially among the listed companies on Bursa Malaysia. One way of doing it is through well-developed and enforced accounting policies. In Malaysia, on 1 July 1997, an independent accounting standard setting body was established under the Financial Reporting Act 1997. Under the Act, the Malaysian Accounting Standard Board (MASB) has the authority to set financial reporting standards and statements of principles for financial reporting in Malaysia. MASB takes over the accounting standard setting responsibility from the local accounting professional bodies, the Malaysian Institute of Certified Public Accountants (MICPA) and the Malaysian Institute of Accountants (MIA). Both bodies have been setting accounting standards for their members for almost 30 years. The change has created a new composition of parties responsible for accounting standards development. The government and the business