Development of Financial Accounting Environment

The first financial reporting regulation in Malaysia can be traced back only as far as 1940 when the Companies Ordinance (amendments) of 1940 was established.

• True

• False

The Ordinances played a major role in regulating financial reporting during this period, until the Malaysian Companies Act (based on the Victorian Act 1960) was enacted in 1965.

• True

• False

The development of accounting standards in Malaysia only began in the late 1960s, where most of the accounting standards involved the adoption of the International Accounting Standards (IAS).

• True

• False

The enforcement of the Financial Reporting Act 1997 took place on 9 March 1997, giving rise to the establishment of both the Malaysian Accounting Standards Board (MASB) and the Financial Reporting Foundation (FRF).

• True

• False

The Companies Act, Malaysian Accounting Standards Board (MASB), listing requirements of the Kuala Lumpur Stock Exchange (KLSE) and the guidelines of the Securities Commission (SC) are currently the major sources of reference for corporate reporting in Malaysia.

• True

• False

The influence of environmental factors such as social, political, economic, _______ in the development of accounting and Malaysia’s recent move towards the adoption of International Financial Reporting Standards (IFRS).

• religion and race

• macro and micro

• size of company and audit firm

• legal and cultural

The corporate financial reporting practices of Malaysia are primarily governed by the Companies Act 1965 (now, Companies Act 2016), the Securities Commission Act 1993, the Kuala Lumpur Stock Exchange (KLSE) Listing Requirements and the Companies Commission of Malaysia.

• True

• False

All the factors that influence financial reporting practices in Malaysia except

• legal system

• tax laws

• educational system

• culture

• foreign currency

The Malaysian Accounting Standard Board (MASB)’s standards setting process is similar to that of the developed countries, for example, Australia, Singapore, Canada, New Zealand, United Kingdom, United States, and the International Accounting Standards Board (IASB). Therefore, the standards setting process is consistent with other international accounting standards boards.

• True

• False

Nobes and Parker (2006) argue that there is no ideal model of enforcement of accounting standards which fits all countries as it depends on the overall regulatory system of the country. Two types of mechanisms, _______, can be used to enforce accounting regulations, helping to ensure quality in the financial reporting practices of a country (Craig & Diga, 1996; Saudagaran & Diga, 2000).

• positive and negative

• conservatism and pluralism

• proactive and energetic

• preventive and punitive