Market Condition
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1. Laws And Regulations
Companies incorporated in Malaysia are required by the law to maintain detailed accounts and to have proper balance sheet and profit and loss prepared and audited every year. This requirement is abundantly clear under the Malaysia Company Act 1969, which states as follows
169 (1) Every company and the directors and managers thereof shall cause to be kept such accountings and other records as will sufficiently explain the transactions and financial position of the company and enable true and fair profit and loss accounts and balance sheets and any other documents required to be attached therefore to be prepared from time to time, and shall cause those records to be kept in such manner as to enable them to be conveniently and properly audited.
On top of the above provision, it is also obligatory under the Income Tax Act 1967 for companies to prepare their financial reports for tax submission to Malaysia Inland Revenue Department.
2. Taxation Submission - Self Assessment Year 2001
With effect from the Year of Assessment 2001, the Official Assessment System will be changed to Self-Assessment System for companies. Self-Assessment System is a system in which taxpayers are required by the law to determine their taxable income, compute their liability and tax returns based on existing tax laws, policies and statements issued by the Inland Revenue Board.
Under the new guidelines, companies will be issued a prescribe forms for furnishing estimate for tax payable by the IRB on quarterly basis depending on the financial year-end of the company. These forms are to be submitted 30 days before the beginning of the basis period of the assessment.
The implementation of the Self-Assessment System is anticipated to post additional difficulties in addition to the current Official Assessment System. Instead of yearly submission, the new guidelines will now enforce the companies to submit the forms on quarterly basis and this is envisaged to affect both the end users and the ASP.
As the majority Malaysia business community specially the small and medium enterprise (SME) are not conversant enough with accounting matters and taxation legislation to enable them to determine, and submit their tax returns hence they will obviously dependent on their ASP to assist them. Consequently, the ASP will need to travel to the end users' premise more frequently than before to collect the necessary document to enabling them to produce the financial reporting and assisting end users on tax computation.
As a result, with the increasing complexity of taxpayer financials affairs and commercial transactions, the ASP will be unable to cope with the ever-increasing demand on human and other resources for sustaining efficient service. Couples with geographical constraints, the pressure mounts and it will be daunting on the part of the ASP to meet the datelines and guarantees quality services.
Note: Self-assessment will be implemented to other businesses and cooperative in the year 2003 and to salaried individuals in 2004.
3. Scarcity And Expensive Accounting Personnel
Qualified and proficient accountants are scarce as they are one of the most sought after professionals in employment market place. In effect, the ratio between accountant to business community is not balance thus pushing up their price tag. Consequently, most small companies cannot afford to employ accountants.
As an alternative, they would engage an account clerk whom could cost them at least RM1000.00 to RM1500.00 per month. However the drawback is that not all account clerks are capable and conversant enough to prepare full set of account such as Balance Sheet, Profit and Loss and Cash flow projection. The ability to generate the financial reporting requires professional skill and hence in such situation, companies will still need to depend on external accountant to churn the necessary reports from the records prepared by the clerk.
4. Complex and Expensive Off-shelf Accounting Application
Most off-shelf accounting softwares are costly with price ranging between RM1500.00-5000.00 per package. On top of it, some vendors would build in additional cost on implementation, customization and also maintenance on yearly basis.
Companies without capable and well-verse account staff would not be able to take full advantage over the system. Under most instances, the account clerk would use the application for limited functionality like recording and printing of Purchase Invoice, Payment Voucher, Sales Invoice and Official Receipt. Critical financial reports like Balance Sheet and Profit & Loss can not be generated largely due to constraints of knowledge. Hence, those companies would source the services of external accountants to assist them.
5. Accountant Not Easily Accessible
This is especially apparent for companies or other legal entities located at remote and rural precinct. They may encounter difficulties to access the nearest public accountants. Logistic and lodging problems could lead to high charges by the public accountant or even the ASP.
In addition, on the part of the public accountant, they would be reluctant to service this group of clients because it is non- worthwhile with the chargeable fee.