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Malaysia’s financial reporting regime - Coggle Diagram
Malaysia’s financial reporting regime
FINANCIAL REPORTING ACT 1997
It establishes the
Financial Reporting Foundation (FRF)
and the
Malaysian Accounting Standards Board (MASB)
as independent authorities responsible for developing and issuing accounting and financial reporting standards in Malaysia.
FRF FUNCTION:
The FRF
provides financing arrangements for MASB's operations and reviews its performance.
Providing its view
to the Malaysian Accounting Standards Board (MASB) on
any matter related to the development and issue
of accounting standards and conceptual framework.
Approving the MASB
budget
.
Engaging or employing persons
and determining the conditions of such appointment as necessary to assist the FRF and MASB in performing their functions under the Financial Reporting Act 1997.
Companies Commision Malaysia
CCM is a regulatory body established to
ensure that the provisions
of the Companies Act 1965 and other laws related to companies
are administered, enforced, carried out, and complied
with in Malaysia.
It
ensures that companies comply
with the approved accounting standards in the preparation of their financial statements.
Security Commission
The Securities Commission (SC) in Malaysia is a regulatory body established under the Securities Commission Act 1993.
Its primary function is
to promote a strong and healthy securities market and maintain investor confidence
in line with the provisions of the SC Act and Securities Industries Act 1983.
Ensuring that
public companies fully disclose information
necessary for making informed investment decisions.
Requiring listed companies
to immediately release information
that is expected to have a material effect on market activity and prices of their listed securities.
Taking appropriate action
when improper use is made of price-sensitive information.
Regulatory outcomes:
Proportionality
aims to achieve a balanced, efficient, and effective regulatory environment. It ensures that the degree to which regulatory bodies regulate markets, products, services, market participants, and activities is suitable for the risks posed, standards of conduct practiced, and the outcomes they seek to achieve.
This approach
ensures that regulations are tailored to the specific circumstances and risks involved,
avoiding unnecessary burdens on regulated entities while still achieving regulatory objectives.
Transparency
supports accountability to the public and stakeholders and helps in designing proportionate regulation. It
involves disclosing relevant information while avoiding the disclosure of information that may harm
the public interest.
Maintaining an open-door
policy in
receiving feedback ensures that stakeholders have a voice
in the regulatory process and can contribute to the development of effective and fair regulations.
Malaysian Accounting Standards Board
The Malaysian Accounting Standards Board (MASB) is an independent authority established under the Financial Reporting Act 1997 in Malaysia.
Its main function is
to develop and issue accounting and financial reporting standards
in the country.
The functions of MASB:
Developing and issuing accounting and financial reporting standards
in Malaysia, in line with international best practices and standards.
Providing a conceptual framework and other forms of authoritative guidance for the development of MASB standards.
Recognizing that users of financial statements
are the primary customers, and aiming to develop standards and guidance that
enable these users to make better economic decisions
.
Working in conjunction with the Financial Reporting Foundation (FRF) to provide financing arrangements for MASB's operations and to review its performance.
AUDITING OVERSIGHT BOARD
Its primary function is to
oversee the auditors of public interest entities (PIEs)
and to
promote confidence in the quality and reliability of audited financial statements
of PIEs.
FUNCTION:
Registration:
Registering auditors of public interest entities
or scheduled funds to ensure that only fit and proper auditors are involved in auditing the financial statements of public interest entities or scheduled funds.
Recognition:
grant recognition to foreign auditors
who audit the financial
statements of foreign corporations listed on Bursa Malaysia.
Inspection:
**Conducting inspections and monitoring programs on auditors to assess the degree of compliance
with auditing and ethical standards. Carrying out inspections at the firm level or engagement level or both.
Enforcement:
Assessing the degree of compliance
with the requirements of the International Standards of Quality Control 1 (ISQC 1).
ISSUES: ACCOUNTING STANDARD OVERLOAD
It refers to the amount of
information required
to be supplied by the reporting entity > amount reasonably
required by users
in making an economic decision
How it happens:
Too many standards
Too detailed standards
General purpose standards failing to provide for differences in the needs of preparers, users, and CPA’s
Some reasons contributed to the standard overload;
Accountants began to
issue a greater number of standards
. The objective is to leave less
judgment and
reduce the amount of litigation
involving accounting principles. The accountant does respond to numerous questions raised about what to disclose and what not to disclose.
To
protect the public interest
and to assist the individual investor generated various and numerous
governmental and professional regulations and disclosures.
To
satisfy the needs of many users
required more detailed standards and disclosures
Effects of Accounting
Standards overload
Accountants
may lose focus
of their real jobs because of the
excessive data is required when complying with existing standards
2.
Audit failures
may occur when compliance is the focus rather than
basic audit procedures.
Implications fo
r legal liability, erosion of professional ethics,
loss of
public support, and dissonance within the accounting profession.
Solving the standards overload problem.
Not all standards apply to everyone
SMEs do not have public accountability.