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UNIVERSITI TEKNOLOGI MARA
THE PREPAREDNESS OF THE ACCOUNTANTS
FROM THE MALAYSIAN ACCOUNTANTS
DEPARTMENT IN MOVING TOWARDS
ACCRUALS ACCOUNTING
MUHAMMAD IQBAL BIN MOHAMED AZHARI
Dissertation submitted in partial fulfillment of the requirements for the degree of
Master of Accountancy
Faculty of Accountancy
June 2013
ABSTRACT
i
The move from cash to accrual accounting in public sector was initially made by the
Malaysian government in year 2011. When the government made the announcement, it
gives a huge shock to the preparers of the governmental financial reporting. It is believed
that by the year 2015, all public sectors in Malaysia would fully adopt the accruals
accounting system. The time to prepare for the implementation process is short compared
to other countries that have successfully implemented the accrual accounting in their
public sector. This study is made to examine the preparedness of accountants in
implementing the accrual accounting. The Lüder’s Contingency Model was constructed
to explain the contributing factors that lead to the accounting innovation in governmental
accounting system. The Model was used in this study to identify the implementation
barriers that will slow down the implementation process. As identified in the Model,
factors such as the qualified accountants are one of the implementation barriers. Thus, the
result of this study shows that the accountant’s attitude and the amount of training
provided to the accountant is positively influence their preparedness in implementing
accrual accounting. Even though the results show that the accountants’ attitude are
positive towards preparing for the implementation of accrual accounting, but there are
concerns over the implementation of accrual accounting in public sector. Most of the
accountants are highly concern on the employees’ lack of knowledge. This shows that
there is still a long way before Malaysia public sector successfully adopts the accruals
accounting system.
ii
TABLE OF CONTENTS
ABSTRACT................................................................................................................................... ii
LIST OF TABLES..........................................................................................................................v
LIST OF FIGURES.......................................................................................................................vi
LIST OF ABBREVIATIONS.......................................................................................................vii
CHAPTER 1...................................................................................................................................1
INTRODUCTION..........................................................................................................................1
1.1 BACKGROUND OF STUDY................................................................................1
1.2 PROBLEM STATEMENT.....................................................................................2
1.3 RESEARCH OBJECTIVES...................................................................................4
1.4 RESEARCH QUESTIONS....................................................................................5
1.5 SIGNIFICANT OF STUDY...................................................................................5
1.6 CONCLUSION......................................................................................................6
CHAPTER 2...................................................................................................................................8
LITERATURE REVIEW...............................................................................................................8
2.1 INTRODUCTION..................................................................................................8
2.2 CASH ACCOUNTING VERSUS ACCRUALS ACCOUNTING.........................9
2.3 THE DEVELOPMENT OF ACCRUAL ACCOUNTING IN PUBLIC SECTOR10
2.4 IMPLEMENTATION BARRIERS......................................................................14
2.4.1 Attitude towards Change of Accounting System..................................................15
2.4.2 Training on Accrual Accounting..........................................................................17
2.5 PREPAREDNESS IN IMPLEMENTING ACCRUALS ACCOUNTING IN PUBLIC SECTOR........................................................................................................................19
2.6 RESEARCH FRAMEWORK..............................................................................19
2.7 CONCLUSION....................................................................................................21
CHAPTER 3.................................................................................................................................22
RESEARCH METHODOLOGY..................................................................................................22
3.1 INTRODUCTION................................................................................................22
3.1 METHODOLOGICAL APPROACH...................................................................22
iii
3.2 SURVEY METHOD............................................................................................23
3.3 QUESTIONNAIRE DESIGN AND MEASUREMENT OF VARIABLES.........23
3.3.1 Section A: Demographic Information...................................................................24
3.3.2 Section B: Accountants’ Preparedness in Implementing Accrual Accounting......24
3.3.3 Section C: Accountants’ Attitudes toward the Transition to Accrual Accounting 25
3.3.4 Section D: The Nature of Training Provided to the Accountants..........................26
3.3.5 Section E: The Concerns of the Accountants in the Move to Accruals Accounting26
3.4 PILOT TEST........................................................................................................26
3.5 SAMPLING SELECTION..................................................................................27
3.6 SURVEY RETURN.............................................................................................27
3.7 DATA ANALYSIS..............................................................................................28
3.8 CONCLUSION....................................................................................................29
CHAPTER 4.................................................................................................................................29
FINDINGS AND DISCUSSIONS................................................................................................29
4.1 BACKGROUND OF RESPONDENTS...............................................................29
4.1.1 Salary Grades of the Respondents........................................................................30
4.1.2 Qualification Background of the Respondents......................................................30
4.1.3 Working experience..............................................................................................31
4.2 EMPIRICAL RESULTS......................................................................................32
4.2.1 Descriptive Statistics............................................................................................32
4.2.2 Descriptive Statistics for the Level of Preparedness among the Accountants.......32
4.2.3 Descriptive Statistics for the Degree of Attitude among the Accountants............34
4.2.4 Descriptive Statistics for Training........................................................................35
4.2.4.1 Types of Training Used To Train the Preparers............................................36
4.2.4.2 Types of Trainers..........................................................................................37
4.3 RELATED TESTS...............................................................................................39
4.3.1 Reliability Statistics..............................................................................................39
4.3.2 Normality Test......................................................................................................40
4.3.3 Correlation Test....................................................................................................40
4.3.4 Multicollinearity Test...........................................................................................42
iv
4.4 ACCOUNTANTS’ PREPAREDNESS IN IMPLEMENTING ACCRUALS ACCOUNTING............................................................................................................................43
4.5 ACCOUNTANTS’ ACCEPTANCE IN THE IMPLEMENTATION OF ACCRUAL ACCOUNTING........................................................................................................45
4.6 FREQUENCY OF TRAINING PROVIDED TO THE ACCOUNTANTS..........46
4.7 ACCOUNTANTS’ CONCERNS ON THE MOVE TOWARDS ACCRUAL ACCOUNTING............................................................................................................................47
4.8 DISCUSSION ON FINDINGS............................................................................50
4.8.1 The Preparedness of the Accountants from Malaysia Accountant Department.. . .50
4.8.2 The Accountants’ Concerns in Implementing Accruals Accounting System........52
4.9 CONCLUSION....................................................................................................53
CHAPTER 5.................................................................................................................................55
CONCLUSION............................................................................................................................55
5.1 INTRODUCTION................................................................................................55
5.2 SUMMARY OF RESULTS.................................................................................55
5.3 IMPLICATION OF STUDY................................................................................57
5.4 LIMITATION OF STUDY..................................................................................58
5.6 RECOMMENDATIONS......................................................................................58
5.6.1 Results on Findings..............................................................................................58
5.6.2 How to Improve the Methodology........................................................................59
REFERENCES.............................................................................................................................60
APPENDICES..............................................................................................................................65
v
LIST OF TABLES
Tables Title Page
Table 3.1 Summary of Survey Return 25
Table 4.1 Descriptive Statistics – Level of preparedness 30
Table 4.2 Descriptive Statistics – The degree of attitude 31
Table 4.3 Reliability Statistics 36
Table 4.4 Normality test 37
Table 4.5 Guidelines for Interpreting Correlation Coefficients 37
Table 4.6 Correlations among the degree of public sector
accountant’s attitude and the level of preparedness
in implementing accrual accounting in public sector
accounting
38
Table 4.7 Multicollinearity test. Tolerance and Varianz
Inflation Factors
39
Table 4.8 Coefficients table for the preparedness 40
Table 4.9 Opinion on whether accruals accounting should be
implement in public sector
41
Table 4.10 Frequency of staff sent for training 42
Table 4.11 Accountants’ concerns on the move towards
adopting accruals accounting by rank
44
vi
LIST OF FIGURES
Figures Title
Page
Figure 2.1
Figure 2.2
Figure 4.1
Figure 4.2
Figure 4.3
Figure 4.4
Figure 4.5
Figure 4.6
Figure 4.7
Figure 4.8
Contingency Model of Public Sector Accounting Innovations
Framework for the relationship between accountant’s attitude
and amount of training provided to accountants with the level of
preparedness in implementing accruals accounting in the public
sector
Salary Grades
Qualification background
Working experience
Types of training
Trainers for accruals accounting system
In-house instructors
External instructors
Summary of findings
11
18
28
29
33
34
34
35
45
vii
LIST OF ABBREVIATIONS
Abbreviations
ABC Activity-Based Costing
GASAC Governmental Accounting Standards Advisory Council
IFAC International Federation of Accountants
IFRS International Financial Reporting Standard
IPN National Accounting Institute
MIA Malaysian Institute of Accountants
MPSAS Malaysian Public Sector Accounting Standard
OECD The Organisation for Economic Co-operation and
Development
PSAC Public Sector Accounting Committee
SPSS Statistical Packages for Social Science
UiTM Institute Mara Technology
UKM National University of Malaysia
UM University of Malaya
VIF Variance Inflation Factors
viii
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND OF STUDY
The move from cash accounting to accruals accounting in the public sector
accounting has been a debate and widely discussed through times. The evidence is seen
when some developed countries have managed to grasp the benefits that accruals provide
in terms of improving the public sector financial reporting, for example, countries like the
United Kingdom, Australia and New Zealand (Connolly & Hyndman, 2006; Lye, Perera
& Rahman, 2004; Ryan, 1998). The change took them several years to complete and
there were a lot of complications and challenges that they needed to confront with. Even
so, there are researchers who are in the opinion that the reason public servants are
reluctant to accept the changes of financial reporting method in the public sector
accounting is because the process of changing from cash accounting to accruals
accounting deemed to be unnecessary and due to uncertainty of risk that the government
is unable to assess (Wynne, 2004).
Some researchers argue that accruals accounting is irrelevant to the public sector
because the nature of economic reasoning in that sector is different from that of private
sector’s; for example, public assets such as heritage type assets and environmental assets
are known as ‘public’ goods (Ouda, 2004) and full accruals accounting are irrelevant to
the assessment of the efficiency of ‘core’ public sector activities since the performance
measurement is different (Rowles, 2004). Up to this date, only the advantages of
accruals accounting have been brought up and this is because the risks and disadvantages
of accruals accounting in the public sector can only be assessed after the successful
implementation the accruals accounting policy itself.
While in Malaysia, the idea of implementing accruals accounting in the public
sector arose in year 2000. Being a non-OECD country, that acknowledges the benefits of
accruals accounting in the public sector accounting. Despite being able to produce a true
and fair view of financial report, accruals accounting focuses on matching concept which
1
also results in better resource management. Besides, based on the UK experience, the
realization of the benefits may take time. According to the UK National Audit Office
announcement in 1993, the benefits of better resource management are too early to be
identified at the preliminary stage of the implementation. As Likierman (2000, p253)
asserts, ‘A full analysis will only be possible once the new systems have been working
for a number of years’.
The successful implementation of accruals accounting depends solely on the
factors such as human resources, recognition of non-current assets, the availability of IT,
and most importantly, involvement of the top management in the process. However,
before such system is being implemented, it is important to examine the human resources
factor. This is because the determinant of a successful implementation of accrual
accounting in the public sector is the efficiency of human resources. It is inevitable that
the most contributing factor in certain failure is because of the lack of preparedness to
improve the accounting system. According to Lüder’s Contigency Model, stimuli is an
event that occurs at the initial stage of the innovation process and creates a need for
improved information on the part of the users of accounting information and increases the
producers’ preparedness to supply such information.
.
1.2 PROBLEM STATEMENT
Cash-based accounting is said to have the virtues of simplicity and objectivity
which is preferable in the public sector accounting. Due to those virtues, accounting
records in the public sector seem to be easy and less complex where there is no
recognition of non-current assets, receipts and payments when there is actual cash
received and paid. However, this method shows that it lacks the effective accounting
reports because with cash-based accounting system, it does not reflect the true value of
public sector performance (Hepworth, 2003). To this date, there are a few studies on the
challenges faced by developing countries, like Malaysia, in implementing accruals
accounting system in the public sector. Previous studies on accrual accounting adoption
in the Malaysian public sector only focus on the factors influencing the government to
change their accounting system (Saleh, 2007).
2
The Malaysian government has made an announcement in January 2001 to
change the accounting basis in the public sector from cash accounting to accrual
accounting. However, the motivation to change the accounting system did not last long,
which made them to give up on the idea. Nonetheless, in May 2011, the government has
made it into their national agenda. Since then, it has forced the accountants of
governmental financial reporting to set up strategies to implement accruals accounting
system.
Based on previous experiences from countries that have implemented accrual
accounting in their public sector, it takes a longer period of time to fully adopt the accrual
accounting into their system. For example, countries such as New Zealand, Sweden and
the UK took more than 10 years (Lye et al., 2005; Connolly and Hyndman, 2010).
Meanwhile, Australia took a longer time to fully implement accruals accounting system
which is almost 20 years (Barton, 2005). Thus, so far the government in Malaysia only
gives a period of not more than 4 years, which is, in 2015 to fully implement accruals
accounting in the public sector. This poses an interesting question of whether the period
given by the Malaysian government is sufficient for the accountants of financial reporting
to be prepared in implementing accruals accounting.
In previous study, Khan and Mayes (2009) identify the pre-conditions in
implementing accrual accounting in the public sector, but their study focused on
improving existing accounting system prior to adoption of accrual accounting, political
ownership, technical capacity and system software development. From another
researcher’s point of view, Wynne (2007), suggests that the important pre-conditions for
implementing accrual accounting in the public sector are the willingness by the public
sector employees to accept the fact that the reform of accounting system would change
the role for those responsible for financial management in the government and the need
for comprehensive training from the top management to the lower ranked staff on the
information of an accrual based accounting system.
Therefore, the present study examines the human factors such as attitude and
training that influence the preparedness in adopting the accrual accounting system. The
present study is trying to fill the gap in Saleh (2007) study which to assess the acceptance
of major changes in the accounting system among the government accountants. Thus, this
3
study can help to improve Malaysian policies in the innovation of accounting system in
the future. In addition, this study helps to identify the right type of training needed for the
public sector employees especially the accountants of financial reporting to adopt the
accruals accounting. The present study also aids in determining the concerns of
accountants toward implementing accruals accounting in the public sector.
1.3 RESEARCH OBJECTIVES
The difference between the motive of users of financial statements in the public
and the private sectors is to require its accountants of financial statements from respective
sectors to present the financial statements differently, in terms of presenting information
that is only valuable to its users. The decision of the Malaysian government to follow the
footsteps of New Zealand, Australia and the United Kingdom to implement accruals
accounting system in their financial reporting will require drastic changes.
The move from cash accounting system to accruals accounting system, if
implemented carefully and successfully, will bring benefit to the public sector.
Nevertheless, the government must take into consideration the problem that they may
face before the adoption of accruals accounting in their accounting system. There are
many factors contributing to the failure of implementation which are the lack of qualified
accountants, lack of training and resistance from the existing staff.
This research looks into the preparedness of the accountants of governmental
financial reporting in implementing the accruals accounting system. This study will look
into their attitude towards the change and if the training provided is sufficient enough to
educate them about accruals accounting.
4
Thus, the objectives of the study are as follows:
1) To examine the relationship between the accountants’ attitude and the frequency
of the trainings given with the level of their preparedness in implementing accrual
accounting in the public sector.
2) To examine the accountants’ attitude towards the adoption of accruals accounting
system in the public sector.
3) To find out if the accountants are sent for training to be given clarification on
accruals accounting.
4) To look into the concerns or worries of the public sector accountants on the move
from cash accounting to accrual accounting system in the public sector.
1.4 RESEARCH QUESTIONS
This dissertation is aimed in providing insights on the pre-implementation
diagnose affecting the level of preparedness of the accountants in implementing the
accruals accounting system in the Malaysian Public Sector accounting system by year
2015. Thus, this study provides the research questions as below:
1. Will the attitude of the accountants towards the application of accruals accounting
facilitate the implementation of accruals accounting system in the public sector?
2. Have the accountants accepted the idea of moving towards accruals accounting in
the public sector?
3. Are the accountants sent for accruals accounting training?
4. Are there any concerns from the accountants on the implementation of accruals
accounting in the public sector?
1.5 SIGNIFICANT OF STUDY
This study is conducted to contribute to the Malaysian public sector, the
professional accounting bodies in Malaysia and the top management of the government in
assessing the attitudes of its employees in the public sector on accepting the change from
cash accounting to accruals accounting. The attitudes of employees; whether positive or
5
negative, symbolize their willingness to change to accruals accounting. The most
common problem that arises during the implementation of accruals accounting in the
public sector is the employees resistance to accept the accruals accounting concept.
According to Patchen (1965), the attitude of members involved in the
organizational change is a crucial factor in determining whether a person chooses to
support or resist a change. This is supported by a research conducted by the United
Nations in 1984, whereby they found that the fear of being burdened with the
responsibility of carrying out new procedures may be the concern of some government
officials who resist on such changes in the accounting system.
Due to lack of qualified accountants operating the government accounts,
employees with no accounting background might find it difficult to understand the
procedure of accruals accounting concept (United Nations, 1984). Personnel with
advanced knowledge in the government accounting are scarce, especially in developing
countries (Ouda, 2004). Therefore, this study is carried out to identify if the training
given to accounting personnel by the top management in each department is sufficient to
enhance their knowledge in accruals accounting concept, to fill in the loopholes and to
increase the level of preparedness to adopt accruals accounting into the system.
1.6 CONCLUSION
This chapter provides the background of this study on the preparedness of the
accountants from the Malaysian Accountants Department in moving towards accrual
accounting system. To achieve the full adoption of accrual accounting in the public
sector, the government needs to investigate the preparedness of the accountants in
implementing the accruals accounting. The government should set up a strategic
implementation plan in order for the implementation process to run smoothly. One of the
steps is to provide training to the accountants of financial reporting. Whether accountants
are willing to participate in the training depends on the motivation from the top
management to encourage their staff to learn about accruals accounting and the
accountants’ attitude in accepting the implementation of accrual accounting in public
sector.
6
Besides, whether the period given by the government to fully implement accruals
accounting is sufficient for accountants to implement accruals accounting remains a
question. The present study will examine the relationship between the accountants’
attitude and the frequency of training in changing the public sector accounting system
with the level of their preparedness in implementing accrual accounting in the public
sector. This study also examines if the accountants have accepted the concept of accruals
accounting in the public sector and if the accountants have gone for training to prepare
themselves with knowledge of accruals accounting.
7
CHAPTER 2
LITERATURE REVIEW
2.1 INTRODUCTION
Following the footsteps of the New Zealand government in adopting accrual
accounting in year 1990 were a few countries such as Australia, Canada, the UK and the
USA. This is encouraged by the public sector committee of the International Federation
of Accountants (IFAC) to adopt the accruals accounting system. IFAC is also the body
responsible for developing international public sector accounting standards. Accruals
accounting focuses on the resources consumed in each accounting period that have been
provided services, rather than simply the cash paid and therefore, reflect the full cost of
service provision. It is argued that the accounting system leads to improved performance
measurement, accountability and control and therefore, encourages the efficiency of
resources usage.
Previously, accruals accounting was considered to be compatible with the private
sector because it is assumed that the users of financial statements need relevant
information which provides a periodic measure of an entity’s financial performance
(income statement) and financial position (balance sheet) that can only be satisfied by the
use of accruals accounting. However, it is the opposite case for the public sector, where
most of their services are not evaluated in terms of profits earned and losses incurred. The
publication of financial statements itself is not in the public interest because the public
has no interest (R. Jones, 1992). Not only that, the problem lies in classifying and valuing
the wide range of assets that exist in the public sector, for example, cultural and heritage
such as art and museum collections, public monuments, national parks and also including
infrastructure assets such as roads.
8
2.2 CASH ACCOUNTING VERSUS ACCRUALS ACCOUNTING
Accruals accounting is a method that takes into consideration the income earned
but not collected and the expenses incurred but not paid. In other words, transactions that
have taken place are counted when the order is made, the item is delivered, or the
services provided, regardless of when the money for the receivables is actually received
or paid. Therefore, accruals accounting provides better financial information for decision-
making compared to accounting system based on cash basis. The accrual-based system
enables a timelier recording of revenues and expenses, providing users of financial
reports with several assumed benefits. Thus, the government recognises the need for the
principles of accruals accounting to be adopted in public sector. The aim of implementing
accruals accounting in the public sector is to facilitate management control by permitting
the full cost of resources consumed to be clearly shown. Therefore, the manager can
anticipate the total cost of his operation.
But, there are many critics on the effectiveness of accruals accounting in the
public sector. Some argue that cash accounting gives better benefit despite its simplicity
(Wynne, 2007). The characteristics of cash accounting are ease of use, data intelligibility
for a wide range of users, reduced implementation costs and simpler presentation of the
financial statements. So cash accounting helps to simplify financial information for
manager making decisions.
That seems to be the case back in those days, but now, with the emerging public
awareness for transparency in governmental financial reporting, the accountants need to
prepare financial statements that show true and fair value of equity financial situation,
profits and losses. The aim of implementing accruals based accounting in the public
sector is to facilitate management control by permitting the full cost of resources
consumed to be clearly shown. Therefore, the manager can anticipate the total cost of his
operation. As Likierman (2000) claims that besides for public accountability purposes,
accruals accounting is used internally within departments for decision making and
discusses the potential for resource accounting and budgeting to improve management.
Therefore, this shows that accruals accounting also provides another purpose in the
public sector accounting which is in management accounting. Robinson (1998) argues
9
that accruals accounting give information on full cost of services that is essential for the
purposes of monitoring performance, benchmarking and preparing the costing of in-
house bids for competitive tendering purposes.
Accruals accounting allows the government to do costing better and to provide
some kinds of measurement for outcome-based budgeting. Cash accounting on the other
hand, is deficient for this purpose because of its failure to measure resources consumed at
its full cost (Salleh and Pendlebury, 2006).
2.3 THE DEVELOPMENT OF ACCRUAL ACCOUNTING IN PUBLIC
SECTOR
Since the past few years, situations in the public sector accounting have changed.
In order to evaluate the public goods and services costs, political manager’s performance,
reduction of corruptions or prevention of financial crises, the users demand for more
transparent financial statements (Oly, 2007). Some researchers argue if accruals
accounting system will provide such traits in the public sector reporting (Wynne, 2007).
The need to provide true and fair information of the public sector’s financial statements
to the users of the information and political influenced organisation is to mitigate the risk
of fraudulent accounting and to make it more accountability (Hepworth, 2003).
The risk of implementing the accruals accounting in the public sector and costs
that may arise during the adoption is unforeseen and the actual result might leave a huge
impact on the government (Connolly and Hyndman, 2006; Wynne, 2007). To reduce the
risk of failure, the government should use the cost-benefit analysis, which has not been
done by any other countries that have adopted accruals accounting (Wynne, 2007)
although some argue that an assessment of cost-benefit may not be possible (Funnell &
Cooper, 1998). In UK, there has been no cost-benefit analysis conducted prior to the
introduction of accruals accounting in the public sector (Hansard, 1996). Despite after
successfully implemented the full accrual-based accounting system, the country did not
made any compliance cost assessment even with the significant costs involved during the
implementation and the claimed benefits on which the accruals accounting is based may
not materialize (Chow and Humphrey, 2003; Mellet, 2002).
10
Meanwhile in Norway, after the clarification on the importance of cost-benefit
analysis prior to the implementation of accrual accounting in public sector, the accrual
accounting project was established in 2004 (Nesbakk, 2010). The purpose of the project
is dedicated to developing and experimenting with accruals accounting. The result is
derived after two years and with the conclusion that too little information on the
usefulness of the new accounting model. The project continued for another two years and
they found out that there are still no major changes due to mixed experiences amongst
users concerning the usefulness of accruals accounting in public sector (Nesbakk, 2010).
Saleh and Pendlebury (2006), provide further support on the finding where due to
difficulties of measuring the actual benefits of accruals accounting this rules out a
conventional cost-benefit analysis.
Therefore, based on these previous researches it showed that the cost-benefit
analysis is something impossible to do as the benefits of accruals accounting depends on
how the users perceived the accounting system to be effective. This may lead to various
opinions on the benefits of accrual accounting that might not outweigh the significant
cost incurred while implementing the accrual accounting system in the public sector.
As for why the government changes their accounting system method is due to
several factors that contribute to the change in government accounting system. This can
be explained by using the Lüder’s (1992) Contingency Model of accounting change in
the public sector. With the use of Lüder’s Contingency Model, the development in
governmental accounting system is influenced by its environmental factors that
comprises of contextual variables, a set of behavioural variables and a dependent
variable. These variables define the innovation process of governmental accounting
systems (see Figure 2.1).
11
FIGURE 2.1: CONTINGENCY MODEL OF PUBLIC SECTOR ACCOUNTING
INNOVATIONS
12
Source: Lüder, K. (1992, p 109)
The contextual variables may be classified into three categories; ‘stimuli’,
structural variables and implementation barriers, which are important factors in affecting
the innovation process. Based on Lüder (1992, p108), “stimuli are events which occur at
the initial stage of the innovation process and these events create a demand for improved
information on the part of the users of accounting information and increase the
producers’ preparedness to supply with such information”.
The structural variables consist of characteristics of the social environment
(external variables) and politico-administrative systems (internal variables) that influence
13
the basic attitudes of its users and producers of information towards improved public
sector accounting information. The implementation barriers are conditions that prevent
the implementation of the innovation process, thus hamper the creation of an improved
accounting system which is in principle desirable.
The behavioural variables are divided into two categories; the expectation of
change from users of information and the change of behaviour from the producers of
information (willingness to change), which are influenced by two factors. First, are their
basic attitudes and secondly, the stimuli that exist at the beginning of the change. These
behavioural variables are important as they determine whether accruals accounting would
be adopted smoothly or not in the public sector accounting system.
The dependent variable for this model is the ‘conceptually different accounting
systems’ (Lüder, 1994, p3). The result depends on the events described above. If there is
a strong stimulus for change, then the result of accounting innovation would be
successful. Otherwise, the innovation is a failure. As mentioned earlier, since the
government has announced the move towards accruals accounting system as their
national agenda in May 2011, it has become the stimulus for accountants of governmental
financial reporting to change the accounting system. The accountants were given until
year 2015 to complete the implementation process. It is a period of not more than 4 years.
The accountants, especially the top management, need to assess if their implementation
strategies are able to overcome the implementation barriers in order for the
implementation process to run smoothly.
The doubts over the effectiveness of accruals accounting will slowly be faded into
the background with the wide adoption of accruals accounting in the public sector (Carlin
2005). The debate has shifted to implementation difficulties (R. Jones, 1992). One of the
major contributing factors in reducing the probability of successful implementation of
accruals accounting is insufficient human resources; either it is by shortage of qualified
staff or due to lack of skill and knowledge to manage accruals accounting in the public
sector.
As explained earlier, under the contextual variables are several categories of
which two of them were found to have positively influenced the attitude and behaviour of
the users and producers of governmental financial information (Stimuli and Structural
14
variable), and the fourth variable, which is the implementation barriers could have a
negative effect on the implementation process (Chan, R. H. Jones and Lüder, 1996).
2.4 IMPLEMENTATION BARRIERS
The European Federation of Accountants (2003) has identified a few essential
conditions for success introduction of accruals accounting in the public sector accounting
system, and some of them emphasis on the importance of the accountancy profession.
Relatively, people who are from the accounting background have a clearer image on what
exactly is accrual accounting. These people are the key factors of facilitating the change
in the government accounting system. And in addition, the government needs to provide
comprehensive management training towards the departmental managers. Accrual
accounting training programme should provide information such as the basic financial
concepts underlying accrual based accounting, how accrual based accounting allows
rooms for improvement, and general understanding of the accounting information system
(Wynne, 2004). Each training module and the information provided should be adequate
to train the public sector employees to be highly skilled workers.
Meanwhile, according to Tickell (2010), low-skilled employees and insufficient
infrastructure will impair the implementation of accruals accounting system compared to
highly skilled employees. He also said that for a developing country, personnel training is
required more rather than changing the accounting software due to lack of highly skilled
human resources. This is supported by a study conducted by Saleh and Pendlebury (2006)
and they found that for developing countries, such as Malaysia, a shortage of
professionally qualified accountants in the public sector requires extensive training
programme to educate the employees. However, they believe that the majority of the
qualified accountants are attracted to greater incentives given by the private sector.
Tickell (2010) added that even after the employees have been well trained and informed
in accruals accounting, there is a chance that he or she will leave the public sector and go
to the private sector for larger salaries, thus lead to shortage of staff in the public sector.
According to Lüder’s Contingency Model, implementation barrier are perceived
as obstacle to the successfulness of implementation within the public sector. Thus human
15
element implication in changing policy is very important for the success of any reform
because people are affected by such changes. Factors such as the qualification of
accountants, ability to understand how to operate the accounting system, and the
knowledge in accruals accounting are important in eliminating the barriers. This shows
the importance of assessing the attitude of the public sector accountants will determine
their preparedness to accept the change in the accounting system. In most cases,
personnel with knowledge in accruals accounting, whether through past working
experience in the private sector or from education, have more positive basic attitude to
the introduction of the informative system.
2.4.1 Attitude towards Change of Accounting System
This study examines the effect of accountants’ attitude on the preparedness of
implementing accrual accounting in the public sector accounting system. An attitude is
referred to as a hypothetical construct representing an individual’s level of like or dislike
for an item (Faghihi & Allameh, 2012). Based on the definition given by the authors, a
member’s attitude can play an important role in determining whether the person chooses
to support or resist a change. Elias (2009) defined attitudes towards organisational change
as an employee’s positive or negative reaction in judging the change initiative
implemented by their organisation. Furthermore, Elias (2009) states that the attitude is
considered as positive when the employee perceived that the changes would give them
benefit and vice versa. Therefore, if the attitudes are positive, then the change would
most likely be successful. But if the attitudes are negative, then the employees would not
likely want to participate with the system change, thus impairing the successfulness of the
implementation process.
Attitude towards change is based on the model by Dunham, Grube, Cummings,
and Pierce (1989) which in their study, they categorised attitude towards change into
three aspects, namely; cognitive, affective and behavioural. The cognitive focuses on the
opinion of advantages and disadvantages, benefits and knowledge needed to manage
change. The affective aspect refers to feelings associated with dissatisfaction and
16
concerns in making changes. The behavioural aspect refers to the action taken or to be
taken in the future whether to support change or resist the change. In their findings, they
found that the members’ attitude tend to be positive if they acknowledge the benefit of
the change and they have the knowledge to implement the change.
In previous literature suggests that accountants and finance officers working in
the public sector departments who employed accrual accounting have a positive attitude
towards the implementation of accruals accounting (Lapsley, 1986; S. Jones and Puglisi,
1997). Meanwhile, Tiron Tudor and Blidisel (2007) find that public sector accountants
who employed accrual-based accounting system during their professional career in the
private sector have a positive attitude in the application of accrual accounting compared
to those who are working in entities which employ cash accounting.
Based on Dunham et al. (1989) theory on attitude towards change, if the public
sector accountants believe that the change to accruals accounting may give benefit to
their department (cognitive) and the changes does not give them any major concerns
(affective), most likely, the public sector accountants are willing to prepare towards
changing the accounting system (behavioural).
Thus, a hypothesis was developed to test the relationship between accountants of
governmental financial reporting attitudes and the level of their preparedness towards
implementing accruals accounting as follows:
H1: There is a significant positive relationship between accountants’ attitudes with
their level of preparedness in implementing accrual accounting.
2.4.2 Training on Accrual Accounting
Support from professional and academic bodies is important in order to create the
conditions appropriate for successful introduction accrual accounting. One of the ways of
overcoming the implementation barrier is to get the support from professional and
academic bodies because the nature of public sector and its environment are important in
17
determining its financial reporting objectives, principles and standards of the
governmental accounting that should be understood (Chan, 1994).
In a country that has fully adopted accrual accounting basis such as New Zealand,
shows evidence of strong support from the Society of Accountants who played an
important role in creating the conditions appropriate for implementation of accrual
accounting in the public sector. In 1981, the society created a public sector called ‘Study
Group’, which was later named as ‘Public Sector Accounting Committee’ (PSAC) to help
develop professional guidelines for public sector accountants to improve governmental
financial reporting (Miah, 1991).
In the Malaysian context, a core team consists of professional accountants is set in
2011 and they team up with the Governmental Accounting Standards Advisory Council
(GASAC). Both parties are responsible for developing the accounting policies
appropriate for the Malaysian public sector. It is clear that the government should seek
help from external consultant to provide training to the existing staff who is involved in
preparing the financial statements. In Malaysia, there is the Malaysian Institute of
Accountants (MIA) that governs the accounting policies and also from private sectors
such as Ernst and Young (E&Y), PricewaterhouseCoopers (PwC), KPMG and many
others.
Aalbers et al., (2013) clarify that the members’ opinion on preparedness are
influenced by personal factors (attitudes and beliefs, planning and organization, personal
learning style) and external factors (top management support, the nature and schedule of
training sessions).
According to Khan and Mayes (2009), one of the key strategies in developing the
implementation plan of accrual accounting reform is to establish communication among
staff during training programme. Participating in a training session will make the
members feel prepared because training helps them to understand and learn the accruals
accounting concept. Any uncertainty or resistance towards the benefits of accruals
accounting in the public sector will fade away after a series of training. As per Saleh and
Pendlebury (2006) suggest if accruals accounting is introduced by the Malaysian
government then a well planned training programme need to be conduct by learning from
other countries experience.
18
Accounting changes first took place in Nepal during the 60s, when cash basis
accounting system was introduced in the government of Nepal. The UN and the USAID
offered help in the reform process in terms of resources and expertise to conduct training
to government officers and accountants (Adhikari and Mellemvik, 2009). As a result,
more than 4000 government officials were given accounting knowledge making it
possible to institutionalize the cash accounting system across the country (Donnalley,
1967).
After years later, in 1987, a government accounting and auditing improvement
project was established and the team proposed a new accrual accounting manual
comprising accounting codes, classifications, and formats and then submitted to the
government to accommodate the weakness of cash based accounting system (FCGO,
1988). In 1989, the government announced the launch of new accounting codes using the
accrual principle in some development projects. However, due to lack of training,
resources and professional expertise has forced the government to stop the
experimentation with the new accounting system after just a few months (Adhikari,
Kuruppu and Mellemvik, 2009).
Thus, a hypothesis was developed in examining the relationship between the
amount of trainings provided to accountants with the level of preparedness in
implementing accrual accounting in the public sector disregarding the type of training:
H2: There is a significant positive relationship between the amount of accruals
accounting training provided to accountants of governmental financial reporting
and the accountants’ level of preparedness in implementing accruals accounting
system.
2.5 PREPAREDNESS IN IMPLEMENTING ACCRUALS ACCOUNTING IN
PUBLIC SECTOR
Change is a step to solve the problems and challenges of an organisation. Cash
accounting is seen as a problem in the public sector accounting system due to its lack of
transparency and easy to be manipulated. To solve these problems, the government has
planned to change the accounting system indicating that they are ready to provide
19
financial report that is transparent and higher in quality. But it all depends on the
preparedness of the overall system.
Preparedness is a state of being able to act immediately. One of the key in
ensuring the successfulness of accruals accounting adoption in the public sector is the
preparedness of the accountants and users of financial information in accepting the
change. This is supported by Jarra, Smith and Dolley (2007), in their study regarding the
likelihood of successful Activity-Based Costing (ABC) in a university setting that
depends on the preparedness of the accountants and the users of financial information.
The preparedness to implement accruals accounting depends on the accountants’
perceptions that the change will benefit both themselves and the system. This is because a
change in the existing system will significantly affect the accountants’ attitudes and
behaviour (Shah and Shah, 2010). Such changes can bring uncertainty, anxiety and
ambiguity to the accountants because of the differences in knowledge and behavioural
patterns among them.
2.6 RESEARCH FRAMEWORK
The main objective of this study is to examine the relationship between the
accountants’ attitudes and frequency of training in changing the public accounting system
and the level of their preparedness in implementing accruals accounting in the public
sector. Derived from previous research, Jarra et al. (2007) assert that the accountants’
preparedness is classified as dependent variable.
Based on the study conducted by Faghihi and Allameh (2012), they found that
accountants’ attitudes towards change influenced their preparedness in the
implementation. Thus, accountants’ attitudes can be the independent variable. The second
independent variable is the amount of training provided to the accountants, which is in
line with Aalbers’ et al. (2013) study on the factors affecting the preparedness of
implementation. Figure 2.2 illustrates the relationship between the accountants’ attitudes
and the amount of training received by the accountants with the level of their
preparedness in implementing accruals accounting in the public sector.
20
Figure 2.2: Framework for the relationship between accountants’ attitudes and the amount of training provided to accountants with the level of preparedness in
implementing accrual accounting in the public sector.
2.7 CONCLUSION
This chapter provides the literature review of this study which examines the
preparedness of accountants in implementing accruals accounting system. The use of
Luder’s Contingency Model will explain the factors of the innovations in public sector
accounting taking place and the successfulness of its implementation.
Implementation barriers are factors that will affect a successful implementation.
Implementation barriers can be divided into several categories, which are, organizational
characteristics, legal system, qualifications of accountants, and the size of jurisdictions.
21
Independent Variables Dependent Variable
Attitude
Training
Preparedness
The number of qualified and skilful accountants is an important factor too. The
government must emphasis on the trainings provided to the staff and ensures that they are
willing to participate to increase their knowledge and skills accompanying with a positive
attitude to guarantee a smooth implementation process.
To prepare for adoption of accrual accounting, there must be a change in attitudes
of members which would lead to change in their behaviours. If the attitude of members is
positive then they are likely willing to participate in the change towards accruals
accounting in public sector. Otherwise, if their attitude is negative and they perceive that
the cost of implementing the accruals accounting is higher than the benefit derived from
the new accounting system, the successfulness of implementation process would be
hampered.
CHAPTER 3
RESEARCH METHODOLOGY
3.1 INTRODUCTION
This chapter explains the research methods used to answer the research questions
and to address the research objectives. In the next section, a description on the data
22
collection is presented. Furthermore, this study examines the feedback received from the
respondents related to the research objectives derived from a set of questionnaire.
The respondents were asked questions based on the objective, which is to
examine the relationship between the accountants’ attitudes and the frequency of training
in changing the public accounting system with the level of their preparedness in
implementing accrual accounting in the public sector. The respondents were also asked
on the type of training that should been conducted and who is responsible in the training
of the accountants in governmental financial reporting. Besides, added to this research are
questions that probe the concerns in implementing the accrual accounting in the public
sector that is to be executed by 2015.
The first section of this chapter details out the research methodology that is used
in conducting the study. The next section explains the survey method used in the data
collection. The third section covers how the questionnaire had been designed and the
measurement for each of the variables for this study. In section four, a pilot test
questionnaire is discussed. The fifth section explains the sampling selection which
specifies the population and the sample of the study.
3.1 METHODOLOGICAL APPROACH
For the purposes of this study, a quantitative research is conducted. The aim of
this research approach is to test hypotheses while looking at the cause and effect by
answering questions such as: how much, how many, how often and to what extent
(Hancock, 1998). This type of research is appropriate to test the main objective of this
study, which is to examine the relationship between accountants’ attitudes towards
accounting system change and the level of their preparedness to implement accruals
accounting in the public sector accounting system.
3.2 SURVEY METHOD
This study used primary data as its source of data in gathering information
regarding accountants’ attitudes toward change and the level of preparedness in
23
implementing accruals accounting in the public sector. A survey is an appropriate method
to collect information from sample which represents the whole population.
The tool that was used to conduct the survey is a set of questionnaire as
questionnaire is a method that can reach wider geographical area and larger proportion of
the group. The questionnaires were distributed directly to the respondents and therefore,
provide faster feedback from the respondents. The respondents’ confidentiality is also
guaranteed when they were only needed to answer questions related to the objective of
the research without disclosing their personal information. The limitations discovered in
using this type of survey are that when the responses might not have been the true answer
and the format of the questionnaire design makes it difficult for the researcher to examine
complex issues and opinions.
3.3 QUESTIONNAIRE DESIGN AND MEASUREMENT OF VARIABLES
As mentioned previously, the objective of this study is to examine the
relationships between the accountants’ attitudes towards changing the accounting system
and their perceptive on the level of accountants’ preparedness within the public sector in
implementing accrual accounting system besides identifying the nature of training. By
referring to the research framework in Chapter 2, the variable used in this study was
divided into two; dependent and independent variables. The dependent variable will be
the main interest of this study.
Furthermore, this research tries to indentify the factors (independent variables)
that influenced the dependent variable. These factors may positively or negatively
influence the dependent variable. Based on the main objective, the accountants’
preparedness in implementing accrual accounting in the public sector will be the
dependent variable, while the accountants’ attitudes will be the independent variable. In
order to meet the objective of the questionnaire, four sections were designed. The first
section, which is Section A, is about the demographic information of the respondents.
The second section, Section B, focuses on the level of accountants’ preparedness
in implementing accrual accounting in the public sector. On the other hand, section C
24
focuses on the accountants’ attitudes toward the transition to accrual accounting in the
public sector. The last remaining two sections cover the second and the third sub-
objective of this study, which is the nature of training provided to the accountants of
governmental financial reporting and the concerns of the accountants in the move
towards changing the public sector accounting system. The following sub-sections
provide explanations on the questionnaire development and measurement of each of the
variables used in this study.
3.3.1 Section A: Demographic Information
The questionnaire had open-ended questions for the purpose of gathering
information related to their background such as gender, age, working experience,
education and their qualification background and their Salary Grade in the public sector.
This information is important to determine the reliability and the quality of the overall
response to the questionnaire.
3.3.2 Section B: Accountants’ Preparedness in Implementing Accrual Accounting
In this study, preparedness was measured by appraising the costs and benefits of
implementing accrual accounting in the public sector (Dalton & Gottlieb, 2003). The
respondents were asked about the short term and long term appraisal on the costs and
benefits analyses when accruals accounting is implemented in the public sector.
According to Dalton and Gottlieb (2003), when the accountants think that accounting
innovation is deemed to bring more benefits than costs, this proves that the accountants
are prepared for the change.
The questions in the questionnaire were adopted and adapted from a study carried
out by Aamir & Farooq (2010) because of the similarity in their research and this study,
whereby the respondents were requested to give their opinions on the benefits of
implementing the International Financial Reporting Standard (IFRS) in SMEs.
25
The 7 items selected consist of the benefits and costs of accruals accounting to
their department and the whole government based on a 5-point Likert scale that ranged
from 1 to 5 referring to “strongly disagree” and “strong agree” respectively.
3.3.3 Section C: Accountants’ Attitudes toward the Transition to Accrual
Accounting
This section explores the accountants’ attitudes toward the change from cash
accounting to accrual accounting in the public sector. Attitude can be determined if a
person chooses to support or resist a change (Dunham et. al, 1989). The attitude of a
member can be classified as positive or negative. If the attitude moves towards positive,
then the implementation of accrual accounting will become smooth. However, if the
attitude moves toward the opposite (negative), it will slow down the implementation.
According to Vijayasarathy (2004), a member’s attitude is positive if he or she
believes that a product or a concept is a good idea. While Hallgrimsson (2005) added that
a member’s attitude is positive when he or she is free from any feelings of uncertainty or
resistance.
The questions for the questionnaire were adopted from a study conducted by
Hallgrimsson (2005). In his research, the questions were constructed in a way that it
measured the employees’ attitudes towards change. Thus, the 7 items were selected to
determine the accountants’ attitudes with scale ranging from “1” to “5” representing
“strongly disagree” to “strongly agree” respectively. Questions such as a member’s
willingness to participate, feeling of uncertainty and resistance were part of the questions
in the questionnaire.
3.3.4 Section D: The Nature of Training Provided to the Accountants
This section was designed to explore the nature of training provided to the
accountants of governmental accounting report. The questions were adopted from a
research conducted by Booz-Allen & Hamilton (2002) because it provides the suitable
measure for the frequency of training and if the training affected the level of preparedness
among the accountants for a change in the accounting system.
26
The respondents were asked of the types of training that should be provided, who
should provide the training and the frequency of the training held in a year and also who
should go for training (see Appendix A).
3.3.5 Section E: The Concerns of the Accountants in the Move to Accruals
Accounting
In this section, this study tries to identify the concerns or worries of accountants
regarding the move from cash to accruals accounting in the public sector. The
government will gain benefits by identifying the concerns of accountants of accounting
report. This may aid the top management to resolve problems faced by the lower ranked
staff on the difficulties in implementing accrual accounting in the public sector.
3.4 PILOT TEST
The purpose of conducting a pilot test was to identify if the questionnaire posed
any problems to the respondents such as ambiguity over the questions. The pilot test was
conducted on 10th April 2013. The questionnaires were distributed among public sector
accountants attending a workshop on preparation of MPSAS slides. 10 questionnaires
were distributed in the morning and they were returned in the afternoon. A reliability test
was conducted based on the 10 responses. The results of the internal consistency of each
variable were excellent with Cronbach’s alpha resulting in 0.748 and 0.798 for the degree
of attitudes and the level of preparedness respectively.
3.5 SAMPLING SELECTION
The main objective of this study is to examine the relationship between the
accountants’ attitudes and the frequency of training in changing the public accounting
system with the level of their preparedness in implementing accruals accounting in the
public sector. As this study focuses on the accountants’ of governmental accounting
reporting, thus the public sector accountants are suitable to be chosen as the population.
27
In the study, a sampling method known as convenience sampling is used.
Convenience sampling is defined by Castillo (2009) as a non-probability sampling
technique where subjects are selected because of their convenient accessibility and
proximity to the researcher. It would be ideal to test the entire population, but the
population of public sector accountant is too large. This is why convenience sampling is
applied, because it permits to gather large amount of information faster and the
respondents are readily available at the place of research. A total of 270 accountants from
the public sector were used as sample for this study and some of them are qualified
accountants, graduated from accounting background while others have other than
accounting background such as Science and Information Technology (IT). Most
respondents play an integral part in preparing the public sector accounting reports.
3.6 SURVEY RETURN
This study took place in the Malaysian public sector environment in which 270
qualified public sector employees were selected. These employees, whereby most of
them are accountants, were part of various departments in the government sector who are
involved in the implementation of accrual accounting system in the public sector
accounting by the year 2015.
A set of questionnaires were distributed during a public sector accounting seminar
held on 23rd April 2013 in the Palm Garden Hotel, Putrajaya. All the questionnaires were
collected at the end of the seminar. By the end of the day, only 199 responses were
gathered and only 133 responses were able to be used for the purpose of this research.
A total of 66 questionnaires were not able to satisfy the needs for this research
because some of the information was not completed by the respondents and some were
left blank. Thus, these questionnaires were excluded from this study. The survey return is
summarised as in Table 3.1 below:
Table 3.1: Summary of Survey ReturnNumber of respondents
Total questionnaires distributed 270
28
(-) Unreturned questionnaires 71
Incomplete responses 66
Total questionnaires for the use of study 133
3.7 DATA ANALYSIS
The data collected from the questionnaires were analysed using Statistical
Packages for Social Science (SPSS) version 21. There were five tests conducted:
descriptive analysis test, reliability test, normality test, correlation analysis test and
regression analysis test.
A descriptive analysis was conducted to explore each of the variables mean,
standard deviation, maximum and minimum value. A reliability test was administered to
examine the internal consistency of each measurement of the variables. Normality test
was conducted to determine if the data are normally distributed. Next, a correlation
analysis was conducted to report the relationship between each variable; while lastly, a
regression analysis was carried out to test the hypotheses of this study. The following
model is used to test the hypotheses from Chapter 2:
P= β0 + β1A + β2T + ε
P = Accountants’ level of preparedness
A = Accountants’ attitudes towards change
T = Amount of training provided to the accountants
3.8 CONCLUSION
The main objective of this study is to examine the relationship between the
accountants’ attitudes and the frequency of training in changing the public accounting
system with the level of their preparedness in implementing accruals accounting in the
public sector. This study fulfilled the requirement of a quantitative research which
examined the causal relationship among the variables. Due to large population of
respondents, a set of questionnaires was used to gather information on the accountants’
29
attitudes and the preparedness towards implementing accruals accounting in the public
sector. The questionnaires were distributed to the public sector accountants who are
mainly the accountants of governmental accounting report. Only 133 questionnaires were
used for this study and the data were analysed using SPSS 21.
CHAPTER 4
FINDINGS AND DISCUSSIONS
4.1 BACKGROUND OF RESPONDENTS
This study took place in the Malaysian public sector environment whereby 270
qualified public sector accountants were selected. These accountants were part of various
departments in the government sector who were involved in the implementation of
accrual accounting system in the public sector accounting that should take place by the
year 2015.
Questionnaires were distributed during a public sector accounting seminar held on
23rd April 2013 in Palm Garden Hotel, Putrajaya. All the questionnaires were distributed
and collected on the same day. By the end of the day, only 199 responses were gathered
and only 133 responses were able to be used for this research. Based on the 133
responses gathered, the respondents were classified according to their salary Grade,
qualification background and working experience.
4.1.1 Salary Grades of the Respondents
From the data collected, Figure 4.1 below shows that most of the respondents
were public sector accountants, which made up 83% (111 respondents) of the total
respondents. Their salary Grades ranged from W27 (diploma holders), W41 (fresh
undergraduates), W48 to W54 (senior accountants). The salary Grade indicates how well-
informed are the accountants on the effectiveness of implementing accruals accounting in
public sector based on their level of education and experience in accounting. There were
also personnel from the IT department, which made up 11% (14 respondents) of the total
30
respondents with salary grades of F41 and the rest 6% (8 respondents) were others
personnel with salary grades ranging between M52 (Administrative and Diplomatic
Officer) and E41 (Economics).
Based on the information gathered, there were personnel from the IT department
and top management who were not involved directly in the implementing of the accruals
accounting, but they are important in assisting the accountants to ensure successful
accruals accounting system implementation.
83%
11%6%
Financial (W)Information Technology (F)Others
Figure 4.1: Salary Grades
4.1.2 Qualification Background of the Respondents
In Figure 4.2 below, it was found that most of the respondents were well equipped
with accrual accounting concept with 86% (114 respondents) of the total respondents
having graduated either with diploma, undergraduate or postgraduate from the accounting
background. However, there were a few them who had graduated from other courses than
accounting such as Science and IT with 4% (5 respondents) and 11% (14 respondents)
from the total respondents respectively.
86%
4%11%
AccountingScienceOthers
31
Figure 4.2: Qualification background
4.1.3 Working experience
In Figure 4.3, the result shows the difference of working experiences between
each respondent. The differences in working experience may give different opinions on
the acceptance of accruals accounting in public sector by the respondents. These
respondents had working experiences in the public sector between 2 to 20 years.
There are 5% (7 respondents) who have worked below than 2 years in the public
sector and these respondents are most likely diploma holders and fresh graduates. The
rest of the respondents, which are 95% of the total respondents (126 respondents) have
worked more than 2 years until up to 20 years in the public sector.
5%
58%
37%Below 2 years2 to 10 yearsMore than 10 years
Figure 4.3: Working experience
4.2 EMPIRICAL RESULTS
4.2.1 Descriptive Statistics
Based on the main objective, this study examined the level of preparedness of the
public sector accountants towards implementing accruals accounting system in the public
sector, whereby descriptive statistics were used to summarise the data.
The descriptive statistics for the second objective, which is the degree of attitude
of the public sector accountants towards the change from cash to accruals accounting
system in the public sector, were also reported in this study.
32
In relation to the third objective, descriptive statistics were used to explain the
types of training for accruals accounting which were chosen by the public accountants
and also a description on their opinions on who should have been trained on the new
accounting system.
4.2.2 Descriptive Statistics for the Level of Preparedness among the Accountants
Table 4.1 below shows the descriptive statistics for the level of preparedness
among the public sector accountants based on 133 responses. The respondents were
asked if the implementation will bring benefit to the overall accounting system in the
public sector, based on the range of 1 to 5, in which “1” indicates that the respondents
thinks that accruals accounting did not bring any benefit to the public sector accounting
and “5” for accruals accounting being beneficial to the public sector accounting system.
Based on the result derived from Table 4.1, averagely the public sector
accountants agreed that accrual accounting does give benefit to the public sector
accounting and they were prepared for the change of the accounting system in the public
sector (M = 4.14, SD = .435). The benefits that accruals accounting are such as providing
more relevant information towards resource allocation and it allows a more strategic
approach to public expenditure, enabling departments to cost the resources and match
them with the outputs they deliver (Likierman, 1997). The initial cost of implementing
the accrual accounting system in the public sector accounting is perceived as costly by
the public sector accountants at a great extent with mean of 4.54 and standard deviation
of .571. As Saleh and Pendlebury (2006) stated in their research the accounting and
administrative costs related to accruals accounting will be much higher during the initial
implementation.
However, 5 out of the 7 items were agreed upon at a great extent that the accruals
accounting system will bring greater benefit than cost after the implementation with mean
between 3.86 and 4.33. The result is consistent with Dunham et al. (1989) in their study
they found that the members’ attitude is positive if they acknowledge the benefit of the
change and they have the knowledge to implement the change. Thus, the result is
consistent with Shah and Shah (2010) findings in which their findings found that the
33
public sector accountants who have a positive attitude towards changing the accounting
system are prepared to change the existing accounting system. They also agreed at some
extent that there was clear planning from the top management in preparing the change in
accounting system (M = 3.69, SD = .898).
Table 4.1Descriptive Statistics – Level of preparedness
N Min. Max. Mean Std. Deviation
Increase the quality and comparability of the financial statements
133 3 5 4.33 .547
Initial stage will cost more time and resources 133 3 5 4.54 .571
Top management have a clear plan/vision 133 2 5 3.69 .898
Generate more benefit in later stage rather than initial cost incurred
133 1 5 3.86 .790
Department will be able to perform better 133 2 5 4.17 .653
Principle of accrual accounting will help to improve overall accounting system
133 2 5 4.17 .642
Give benefit to the department 133 3 5 4.22 .582Overall Average for level of preparedness 133 3 5 4.14 .435
4.2.3 Descriptive Statistics for the Degree of Attitude among the Accountants
Table 4.2 below presents the descriptive statistics for the degree of attitude among
the public sector accountants towards implementing accruals accounting based on 133
responses. Based on the questions with scale ranging 1 to 5, the respondents were asked
of their opinions which reflected their attitude on the idea of moving from cash to
accruals accounting in the public sector accounting system.
The scale represents by “1” which indicates the respondents have a negative
attitude towards the implementation of accruals accounting in the public sector
34
accounting and “5” for positive attitude towards the implementation of accruals
accounting in the public sector accounting.
Table 4.2Descriptive Statistics – The degree of attitude
N Minimum Maximum Mean Std. Deviation
Acceptance of full accruals accounting system in the public sector accounting 133 1 5 4.40 .696
Feel optimistic towards implementing accruals accounting 133 2 5 4.16 .716
Likely to be involved in changing the current accounting system 133 3 5 4.28 .542
Uncertain with the benefits of accrual accounting system in public sector accounting*
133 1 5 3.02 .937
Resist on changing the current accounting system* 133 1 4 3.71 .998
Feel irritated when there is a need to change the accounting system* 133 1 5 3.29 1.036
Support the changes made to accounting system 133 3 5 3.98 .621
Overall Average for Attitude 133 2.29 4.57 3.54 .359*Note items were reversed before analysis
Based on Table 4.2, the result shows that the respondents had a positive attitude
towards the implementation of accrual accounting in the public sector accounting system.
It can be concluded that the overall attitude of the public sector accountants mean was
3.54. The result is supported by most of the public sector accountants’ attitudes which
were rated with mean between 3.02 and 4.40.
Before deriving at the actual results, there were 3 questions with negative
wordings being reversed. These questions are “Uncertain with the benefits of accrual
accounting system in the public sector accounting”, “Resist on changing the current
accounting system” and “Feel irritated when there is a need to change the accounting
system”. The respondents showed that they disagreed with the negative attitude questions
35
with mean 3.02, 3.71 and 3.29 respectively. According to Hallgrimsson (2008),
employees with high levels of uncertainty show a lower level of preparedness, than those
who show low level uncertainty. Based on the derived result of this study, most of the
respondents show low level of uncertainty which mean their attitude is more towards
positive. This indicates that the respondents are prepared in implementing the accruals
accounting.
In addition, they showed positive result because “Acceptance of full accrual
accounting system in public sector accounting” was ranked the highest (M = 4.40, SD =
.696), followed by “Likely to be involved in changing the current accounting system” (M
= 4.28, SD = .542) and “Feeling optimistic towards implementing accrual accounting”
(M = 4.16, SD = .716).
4.2.4 Descriptive Statistics for Training
The descriptive statistics summarises the information on the types of training that
is provided for preparation of accruals accounting and the trainer who is responsible in
training the accountants who were mainly accountants in the public sector.
4.2.4.1 Types of Training Used To Train the Preparers
Figure 4.4 show the types of training that were chosen by the 133 respondents.
The respondents were allowed to answer more than one type of training which they
preferred. As shown in the graph below, 96% (128 respondents) out of the total
respondents chose classrooms and seminars for accruals accounting training. Apart from
that, 49% (65 respondents) of the total respondents picked computer based training as a
medium to learn accruals accounting.
Meanwhile, as for 31% (41 respondents) out of the total respondents chose to use
self- study manual as a guide because it is convenient for them and they could bring back
materials to study at home. 15% (20 respondents) of the respondents chose video
36
training and surprisingly, 5% (7 respondents) of the total respondents chose other training
methods such as mentor-mentee programme.
Classroom/Seminar
Home study manual
Computer based training
Video Others0
20
40
60
80
100
120
140128
41
65
20
7
Figure 4.4: Types of training
4.2.4.2 Types of Trainers
Figure 4.5 shows the summary on the information for trainers who should provide
the training to the public sector accountants. The respondents were allowed to answer
more than one type of trainer if they had preferred.
Based on the results, most respondents; 76% (101 respondents) favoured an
external instructor to train them with the accruals accounting system. As a matter of fact,
in-house instructors were the second choice, where 65% (86 respondents) of the
respondents relied on their own department to train them the accruals accounting system.
Both types of in-house and external instructors will be explained thoroughly in the next
paragraphs. However, some respondents (6% of total respondents) suggested that trainers
37
from the computer service department and system integrator teach them with regards to
accruals accounting software system, while 8% (11 respondents) of the respondents
reported that they are not clear of who should train them.
In-house instructors
Externalinstructors
Others Don’t know0
20
40
60
80
100
120
86
101
8 11
Figure 4.5: Trainers for accruals accounting system
Information on each type of in-house trainers is summarised in Figure 4.6. Based
on Figure 4.6, a total of 86 respondents who chose in-house instructors as the trainer
selected Accountant General (AG) to provide the man power to train other public sector
accountants with 51% of the respondents (44 respondents), while 19% (16 respondents)
of them chose National Institute of Accountants. As for the rest of the respondents, they
chose their own top management to provide the training for accruals accounting with the
Finance Department and Senior Accountants as their option; 25% and 5% of the
respondents respectively.
38
51%
19%
5%
26%
Figure 4.6: In-house instructors
Accountant GeneralNational Institute of AccountantsFinanceDepartmentSenior Accountant
The types of external instructors is summarise in figure 4.7. As a result, it shows
that out of 101 respondents who chose external instructors as trainers, 68% (69
respondents) of them selected Big 4 audit firms such as PricewaterhouseCoopers (PwC),
Ernst & Young, KPMG and Delloitte to provide consultancy for the application of
accruals accounting system in the public sector. On the other hand, the remaining 32%
(32 respondents) chose researchers from universities such as UiTM, UKM and UM to
provide training module for the public sector accountants who are involved in the
preparation of changing the public sector accounting system. The result of the study
supports findings from Saleh (2007), in which she indicates that in order for Malaysia to
successfully implement the changes in governmental accounting, there is a need for a
strong support from the professional bodies and private sector accounting firms.
68%
32%
Figure 4.7: External instructors
Big 4 audit firmsOthers
39
4.3 RELATED TESTS
4.3.1 Reliability Statistics
A reliability test had been conducted based on the 133 responses, which can be
summarized as in Table 4.3. It was conducted to examine the consistency of each
measurement of variables if they measure the same thing (Field, 2009; Pallant, 2005).
Based on Field (2009), the range of internal consistency is between 0 and 1.00.
Pallant (2005) further states that the measurements are reliable when the
Cronbach’s alpha is more than .70. From the test’s result, it is shown that the internal
consistency for each variable is acceptable with Cronbach’s alpha of .736 and .759 for the
attitude of accountants and the level of preparedness respectively.
Table 4.3Reliability statistics
Variable Cronbach’s Alpha N of Items
A .736 7
P .759 7
Where
A = Attitude
P = Preparedness
4.3.2 Normality Test
Skewness and kurtosis test were performed to test the normality of the data.
Skewness shows if the distribution is symmetry, whereby kurtosis provides information
about the “peakedness” of the distribution (Pallant, 2005). If the value approaches zero,
the distribution will be normal (Pallant, 2005). The results of the normality test for each
variable were summarized as in Table 4.4.
The rule of thumb for the values of skewness and kurtosis are normally
distributed between -1 and +1. Based on Table 4.4, both attitude and the preparedness
have a skewness value of .204 and -.164 respectively, which meant that they were within
40
the rule of thumb. As for kurtosis value, both variables also reported to be within the
rule’s range of -1 to +1 which were .805 and .341 respectively.
Table 4.4 – Normality testVariable Skewness KurtosisA .204 .805
P -.164 .341
A = Attitude
P = Preparedness
4.3.3 Correlation Test
Correlation analysis is used to determine the existence of a relationship between
the two variables and how strong the relationship is (Pallant, 2005). According to Hinkle,
Wiersma, and Jurs (1998, p. 105) there are five ranks of correlation coefficient that
explain the strength of relationship between variables, as referred in Table 4.5.
Table 4.5 – Guidelines for Interpreting Correlation CoefficientsRange of Positive Coefficient
Type of relationship Range Negative Coefficient
.90 to 1.00 Very highly correlation -.90 to -.100
.70 to .90 Highly correlation -.70 to -.90
.50 to .70 Moderately correlation -.50 to -.70
.30 to .50 Low correlation -.30 to -.50
.00 to .30 Little, if any correlation .00 to -.30
Table 4.6 shows the correlations among the degree of public sector accountants’
attitude, the level of preparedness in implementing accrual accounting system and the
41
frequency of training conducted. Firstly, P (Preparedness) represents the overall average
of the level of preparedness in implementing accrual accounting system. Secondly, A
(Attitude) represents the overall average of the degree of the attitude of the public sector
accountants and lastly, T (Training) represents the overall average of the frequency of
training conducted.
Table 4.6Correlations among the degree of public sector accountant’s attitude and the level of preparedness in implementing accruals accounting in public sector accounting
P A T
P
Pearson Correlation 1 .289** .269**
Sig. (2-tailed) .001 .002
N 133 133 133
A
Pearson Correlation 1 .093
Sig. (2-tailed) .285
N 133 133
T Pearson Correlation 1
42
Sig. (2-tailed)
N 133
**. Correlation is significant at the 0.01 level (2-tailed).
Where
P = Preparedness
A= Attitude
T= Training
Based on the results from Table 4.6, A has a significant weak positive relationship
with P at r (131) = .289, p < .01. This shows that as the degree of attitude increases, the
level of preparedness increases too. This is also the same with T that has a significant
weak relationship with P at r (131) = .269, p < .01, indicating that the level of
preparedness increases as the frequency of training is increased.
4.3.4 Multicollinearity Test
In order to test the existence of multicollinearity in this present study data
analysis, correlation matrices and variance inflation factors (VIF) were employed. The
multicollinearity can be a problem when tolerance is less than 0.1 and VIF is greater than
10 (Norusis, 2005). Based on Table 4.7 below, the tolerance for both independent
variables is more than 0.1 and the VIF is almost equal to 1, therefore none of the
correlation between the independent variables; the degree of attitude (Attitude) and
frequency of training (Training) indicates severe multicollinearity.
Table 4.7 Multicollinearity test - Tolerance and Variance Inflation Factors
Tolerance VIF
A .991 1.009
T .991 1.009
43
Where
A = Attitude
T = Training
4.4 ACCOUNTANTS’ PREPAREDNESS IN IMPLEMENTING ACCRUALS
ACCOUNTING
Regression analysis was used to examine the linear relationship between
dependent variable and one or more independent variables. For this study, the dependent
variable is the level of preparedness among the public sector accountants in changing the
public sector accounting while the independent variables are the degree of accountants’
attitude and the frequency of training provided to the accountants. In short, the model
below explains the hypotheses of this study as stated in Chapter 2:
P= β0 + β1A + β2T + ε
P = Accountants’ level of preparedness
A = Accountants’ attitudes towards change
T = Amount of training provided to the accountants
Table 4.8 below shows the regression analysis for the model based on 133
responses. The model is significant at 1% significant level with Adjusted R-squared
of .130, F (2,130) = 10.387, p = .000. Based on the result, it is suggested 13% of the
variation in the level of preparedness could be explained by variation in the degree of
attitude and the frequency of training.
Table 4.8Coefficients table
Beta t Sig.
(Constant) 7.785 .000
44
A .266 3.266 .001
T .245 2.998 .003
R2 .143
Adj. R2 .130
F – Statistics (Sig.) 10.837 (.000)
df (2,130)
N 133
a. Dependent Variable: Preparedness
Where
A = Attitude
T = Training
Based on the model developed earlier, its purpose was to test H1 and H2.
Therefore, Table 4.8 shows if the results of these hypotheses are supported or otherwise.
H1 predicts that there is a significant positive relationship between the public sector
accountants’ attitude and the level of their preparedness in changing the public sector
accounting system. Based on the result in Table 4.8, it is found that the degree of attitude
did significantly affect the level of preparedness, b = .266, t (130) = 3.266, p = .001. This
is supported by the relationship in the correlation analysis between the degree of attitude
and the level of preparedness which is found to be significant at 1% significant level, as
stated in Table 6. As the degree of attitude did significantly affect the level of
preparedness, thus, H1 is accepted.
Meanwhile, Table 4.8 also shows that the frequency of training did significantly
affect the level of preparedness, b = .245, t (130) = 2.998, p = .003. This result is in line
with the result from the correlation analysis in Table 4.6. Referring to Table 4.6, the
relationship between the frequency of training and the level of preparedness is
significantly positive. Therefore, H2 is accepted, which an assumption that there was a
significant positive relationship between the frequency of training and the level of
preparedness.
45
4.5 ACCOUNTANTS’ ACCEPTANCE IN THE IMPLEMENTATION OF
ACCRUAL ACCOUNTING
To meet the second objective, a descriptive analysis was conducted to identify the
number of respondents who agreed with the implementation of accruals accounting in the
public sector. Based on the results from Table 4.9 below, it was found that most of the
respondents agreed with the idea of moving towards accrual accounting in the public
sector. Furthermore, 126 of the respondents felt that the accounting innovation in the
public sector is beneficial to the government as a whole. This is proven when the
respondents were asked about the effectiveness of accruals accounting in public sector
department majority of them agree that accruals accounting will bring benefit to their
department (refer Table 4.1). This is because, most respondents are public sector
accountants and their level of knowledge in accruals accounting is high.
Table 4.9Opinion on whether accruals accounting should be implement in public sector
Number of respondents
Percentage(%)
Strongly Disagree 1 .8
Disagree 2 1.5
Neutral 4 3.0
Agree 62 46.6
Strongly Disagree 64 48.1
46
Total 133 100
However, there were three respondents who disagreed with the idea of adopting
accruals accounting in the public sector and four respondents neither agreed nor
disagreed with the idea. Although the number of respondents who disagreed was small,
they still represented the total 133 respondents. Therefore, the head departments should
look into the matter of why there are some accountants who disagreed with the
implementation of accruals accounting. It is important to know why they resist the
changing of the accounting system because it may impair the implementation process.
4.6 FREQUENCY OF TRAINING PROVIDED TO THE ACCOUNTANTS
The third objective of this study is to explore the frequency of training provided to
the accountants. In order to meet the objective, a descriptive statistic was conducted and
the result is shown in Table 4.10 below. The result from Table 4.10 shows that 86% of
the 133 respondents went to seminars for accruals accounting training. However, there
were still those who did not go for training (8 respondents), showing that the training
programme was not made compulsory to the staff by the top management. Surprisingly,
11 respondents answered “Don’t Know” for the question asking if their department sent
them for accruals accounting training.
Table 4.10Frequency of staff sent for training
Do you go to any accrual accounting training seminars
Number of respondents Percentage(%)
Yes 114 86
No 8 6Don’t know 11 8Total 133 100
47
4.7 ACCOUNTANTS’ CONCERNS ON THE MOVE TOWARDS ACCRUAL
ACCOUNTING
The fourth objective of this study is to identify the concerns of accountants on the
move towards accrual accounting. There are fourteen types of concerns that were listed
down by the respondents. The result of this study was derived from the number of times
the concerns were mentioned by the respondents. The concerns were then ranked from 1
to 13; 1 indicating the highest concern and 13, the least concerned by the respondents.
Table 4.11 below provides the summary for concerns that have been ranked by
the respondents. Based on the result, it shows that the employee’s lack of knowledge was
ranked as the highest concern by a majority of the respondents. It was mentioned for 56
times by the respondents. The result also shows that the top management is slightly
concerned about the employee’s lack of knowledge (29 times).
Next, the second highest concern is the timeliness of implementation with a total
of 23 times chosen by the respondents. Both the top management and the lower ranked
staff concern over the period given for implementing accruals accounting (11 times and
12 times respectively). Applicability of the new accounting software is in rank three,
which is the third highest for the concerns among the accountants over the
implementation of accrual accounting. Both the top management and the lower ranked
staff share the same view about the applicability of new accounting software.
Ranked in four is the concern over insufficient accounting record for assets in the
public sector was frequently mentioned by the top management; 11 times. This showed
that the top management was aware of the method in recording assets for the public
sector was not as efficient as the private sector. Falling under number five is the concern
over the recognition and measurement of assets. Over the past few years, assets have
become a major concern when moving towards accrual accounting system in the public
sector. Various researches were made to identify the possible way to overcome this
problem.
The concern over insufficient training for the lower ranked staff was ranked
number six, with most of the lower ranked staff frequently mentioning about the concern
(8 times). Thus, this indicated that the top management must provide more intensive
48
training for their lower ranked staff, even though it was only mentioned 3 times by the
top management, showing that the lower ranked staffs competency was the lowest of
their concern.
Next, the concern ranked as at the seventh place was the employee’s resistance to
change. This becomes a major concern because the lower ranked staff had frequently
mentioned that the employee’s do resist the change of the accounting system which will
affect the implementation process. This may be due to the fact that the senior staff feels
compatible with cash accounting system. Again, the management should look into why
the staffs resist the change of the accounting system.
Subsequently, the employee’s preparedness falls short after the employee’s
resistance that is 8th rank. Employee’s preparedness can be influenced by many factors
such as attitudes and their understanding of the accounting concept. Employees will soon
need to realise that they need to change their behaviour and habits to accommodate with
the new accounting system. This also means that they need to acquire new knowledge.
Factors such as resistance to change and uncertainty can hinder an employee’s
preparedness.
Next, the top management’s lack of motivation, support and knowledge were
ranked at 9th, 10th and 11th places respectively. Both the top management and the lower
ranked staff equally agreed with the concerns over the top management’s lack of
motivation and support. However, the top management is more concerned over the lack
of knowledge in accruals accounting among the head departments (4 times). The last two
concerns that were least mentioned by the accountants were the revelation of revenue and
expenditure and the concern over the lack of understanding from potential users. Both
were ranked at 12th and 13th places respectively.
Table 4.11Accountants’ concerns on the move towards accruals accounting by rank
Rank ConcernsTotal
NTop Management Lower Staff
N % N %1 Employees lack of
knowledge56 29 52% 27 48%
2 Timeliness of implementation
23 11 48% 12 52%
3 Applicability of new 19 10 53% 9 47%
49
software4 Insufficient accounting
record of assets16 11 69% 5 31%
5 Recognition and measurement of assets
11 3 27% 8 73%
6 Insufficient training for lower staffs
11 6 55% 5 45%
7 Employee’s resistance to change
10 4 40% 6 60%
8 Employees are not ready 9 3 33% 6 67%9 Top management lack of
motivation7 3 43% 4 57%
10 Top management lack of support
6 3 50% 3 50%
11 Top management lack of knowledge
5 4 80% 1 20%
12 Recognition of revenue and expenditure
4 1 25% 3 75%
13 Users lack of understanding 1 1 100% 0 0%Note: N represents the number of time the concerns were mentioned by respondents
4.8 DISCUSSION ON FINDINGS
4.8.1 The Preparedness of the Accountants from Malaysia Accountant
Department
To meet the first objective, the present study examined the relationship between
the accountants’ attitude towards change and the frequency of training provided to them
with the level of their preparedness in implementing accrual accounting in the public
sector.
50
The regression analysis was conducted to give insight on the relationship between
the accountants’ attitude towards change and the amount of training provided to them
with their level of preparedness in implementing accrual accounting in the public sector.
Two hypotheses were developed to help attain the results from the regression analysis.
The result is summarised in Figure 4.8.
Figure 4.8 shows the summary of findings for this study. It was found that the
accountants’ attitude towards change has a significant positive relationship with the
accountants’ preparedness in implementing accruals accounting. It is also found that the
amount of training provided to the accountants has a significant positive relationship with
their preparedness in implementing accruals accounting.
H1=.266**
H2=.245**
Note: ** significant at .01 level
Figure 4.8Summary of findings
The first hypothesis (H1) assumes that there is a significant positive relationship
between the accountants’ attitude and their preparedness in implementing accrual
accounting in the public sector. Based on the result of regression, there is a significant
positive relationship between the accountants’ attitude and their preparedness. Therefore,
the first hypothesis is accepted. This finding is consistent with previous research carried
out by Dunham et al. (1989) and Elias (2009) where they found that there is a significant
positive relationship between its members’ attitude and the likelihood of successful
implementation.
51
Attitude
Frequency of training
Level of Preparedness
The second hypothesis (H2) assumes that there is a significant positive
relationship between the amount of training provided and the accountants’ preparedness
in implementing accruals accounting in the public sector. Based on the result of
regression, there is a significant positive relationship between the amount of training
given and the accountants’ preparedness. Hence, the second hypothesis is accepted. The
result of this finding is consistent with previous research conducted by Aalbers et al.,
(2013) where they found that the members’ preparedness is influenced by external factors
such as the nature and the amount of training sessions given to the members.
Furthermore, referring to the Contingency Model (Lüder, 1992), stimuli are
events that create a demand for improved information from users and increase the
producers’ preparedness to supply such information. If there is a strong stimulus for
change, then the result of accounting innovation would likely be successful. In Malaysia,
before the announcement was made by the government to make the move towards
changing from cash to accruals accounting as their national agenda, there were no
stimulus that triggered the need of preparing the implementation process. But since the
announcement was made in May 2011, it was assumed that the announcement is a strong
stimulus for the accountants to change the public sector accounting system. The
accountants have started to panic and this triggered the need to prepare for the
implementation process.
However, the result from this study indicated otherwise. It seemed that stimulus
was not strong enough to make the accountants determined to change. There were still
weaknesses in the management setting. Besides, some employees resisted in accepting
the concept of accruals accounting in the public sector and some did not even go for
accruals accounting training. This shows that the staff is still not convinced with the
appropriateness of accruals accounting in the public sector accounting system. The
employees also might think that preparing for the change of accounting system was not a
priority to them because there was no strong urge from the management to change the
accounting system in their department. Based on the findings by Salleh and Pendlebury
(2006), they found that there was little support from the external users of financial
reporting to change from cash to accruals accounting. This may give the reason why the
52
accountants of governmental financial reporting were reluctant in changing their
accounting system.
4.8.2 The Accountants’ Concerns in Implementing Accruals Accounting System
This study also made an attempt to determine the concerns or worries of the
public sector accountants (preparers) in the implementation of accruals accounting in the
public sector (refer Table 4.11). Generally, most of the respondents were concerned about
the employees’ lack of knowledge. Some of the accountants of the governmental
financial reporting may have a little or no accounting background. This concerns them on
the acceptance of the employees on the idea of moving to accrual accounting since they
have no knowledge on the benefit of accruals accounting. They may feel that the change
is a burden as they need to learn new things just as they have adapted with the existing
accounting system.
The second highest concern among the accountants was the timeliness of the
implementation process. The effective date of full accruals accounting in the public
sector is in year 2015 as set by the government. The accountants think that the period is
too short as not more than 2 years left to implement accruals accounting. Based on
previous experience, developed countries such as New Zealand, Australia and the UK
took more than 10 years to implement the system. It is still uncertain if Malaysia public
sector will be able to adopt the accruals accounting within that short period of time.
Furthermore, the accountants from the governmental financial reporting consist of
accounting and non-accounting staff. Thus, the time to train the non-accounting staff will
take a longer period and some of the existing staff who is used to cash accounting might
resist the change to accruals accounting system. The respondents think that not only the
lower staff need to be trained but the top management also need to play their role in
enhancing their understanding of the accruals accounting concept and providing support
to the lower ranked staff. Besides that, it was also found that a majority of the
respondents mentioned the reason that hinders the implementation of accrual accounting,
which is, insufficient or improper accounting record in the government, mainly regarding
the assets. With the wide range of assets within the government, it is difficult to provide
53
the opening balance for each of the assets. There were also concerns over the recognition
and measurement of non-current assets within the public sector.
Besides, a respondent mentioned about the concern over the acceptance of the
users of the public sector financial report. The respondent felt that the implementation of
accruals accounting in the public sector accounting might not be beneficial to the users
since the government is not a profit oriented organisation and the users have no interest.
According to Connolly and Hyndman (2006), the users lack understanding on accrual
accounting, therefore, even if the government is able to adopt the accrual accounting
information, there is no one who will use the information. On the other hand, another
research conducted by Mack and Ryan (2007) found that the government agencies in
Australia are beginning to use annual report to communicate with their stakeholders, the
same manner practised as the private sector.
4.9 CONCLUSION
This chapter provides the findings and discussion to meet the objectives of the
present study. This study examines the preparedness of the accountants in the Malaysia
Accountant Department in moving towards accrual accounting and to explore the
accountants’ acceptance towards adopting accruals accounting in Malaysia public sector.
In relation to the preparedness, this study looked into the matter if the accountants were
sent for training. In addition, this study is also determined to find out the concerns of the
accountants on the move from cash accounting to accruals accounting.
The result from the findings showed that the accountants’ preparedness in
implementing the accruals accounting system is significantly influenced by their
attitudes. It is also found that the amount of training provided also had a significant
influence on the level of accountants’ preparedness. Up to now, there is still concern over
the implementation of accruals accounting in Malaysia public sector. Most accountants
were concerned with the lack of knowledge on governmental financial reporting and
believed that the period given to fully implement accruals accounting system is not
sufficient.
54
CHAPTER 5
CONCLUSION
5.1 INTRODUCTION
The introduction of accruals accounting in Malaysian public sector accounting
reveals a clear determination to move towards new public financial management. Based
on past experience from other countries that have successfully implemented accruals
55
accounting in the public sector accounting showed many challenges and complications
they need to overcome. For a developing country such as Malaysia, this may require
several more years of researches and studies so that the implementation processes run
smoothly. Despite being criticised about the relevance of adopting accruals accounting in
the public sector, many researchers support the idea and showed that accruals accounting
can bring out the objective of new public management to the surface.
This research tends to study the effect of accountants’ attitude towards change
with their preparedness in implementing accruals accounting in Malaysian public sector.
Based on the study conducted by Lüder (1992), the implementation barrier is the factor
that may impair the result of implementation. The barrier can be categorised as the
availability of qualified accountants in the public sector. By lifting this barrier, the
implementation process shall become much easier and faster.
5.2 SUMMARY OF RESULTS
In relation to the main objective of this study which is to examine the relationship
between the accountants’ attitude towards change and the frequency of training provided
to them with the level of their preparedness in implementing accruals accounting in the
public sector. As for the first hypothesis, the results showed that there was a significant
positive relationship between the accountants’ attitude and the level of preparedness. This
result is consistent with researches carried out by Dunham et al., (1989) and Elias (2009),
whereby their results showed that there is a significant positive relationship between
members’ attitude and the likelihood of successful implementation. If the accountants’
attitude is positive, the implementation of accruals accounting in the public sector will be
achieved in time.
Furthermore, the results for the second hypothesis showed that there was a
significant positive relationship between the amount of training provided and the level of
preparedness. Similar findings were found in Aalbers et al., (2013), that show that the
members’ preparedness is influenced by factors such as the nature and amount of
trainings given.
56
Next, based on the Contingency Model (Lüder, 1992), stimuli are events that
occur at the initial stage of the innovation process. These events create the demand and
the supply for improved accounting information. If there is a strong stimulus for change,
then the result of accounting innovation would likely be successful. Before the
announcement was made by the Malaysia government to change from cash to accrual
accounting as their national agenda, there were no stimulus that triggered the need to
prepare the implementation process. The stimuli occur when the government made the
announcement in May 2011. But it is considered as a weak stimulus since the accountants
from the governmental financial reporting are moving in a slow pace to prepare
themselves for the implementation of accruals accounting in the public sector. The
trainings were not made compulsory to all employees involved in preparing the
governmental financial reporting and there were a few who resisted the change of the
accounting system.
Maybe a strong stimulus would come from the users of governmental financial
information. If the users are not interested in the accounting system change, the
accountants might feel that there was no use for them to implement the change. If the
users demand for more proper accounting information from the government, it will force
the accountants to implement the change.
Besides, this study was able to obtain feedback from the respondents related to
their concerns about the implementation of accruals accounting in the public sector. Most
of them mentioned that the employees’ lack of knowledge as a major concerns followed
by timeliness of implementing accruals accounting system in the public sector.
This may be due to the short period given to the accountants from the
governmental financial reporting in preparing for the implementation process. With some
of the staff are from non-accounting background, this should require a substantive
amount of training in accrual accounting. Improper record of accounting information
makes it hard to provide the opening balance at the beginning of the period. Thus, the
accountants need to work extra hard for retrieving the information and this may take a lot
more of their time.
57
5.3 IMPLICATION OF STUDY
This study provided the evidence on the preparedness of implementing accrual
accounting in the public sector. The study was conducted in Malaysia in order to study
the effect of the accountants’ attitude and the amount of training provided to them with
the level of preparedness in implementing accrual accounting in the public sector. If the
accountants’ attitude is positive, the implementation of accruals accounting in the public
sector will be achieved in time. This study also helped to identify the responses from the
accountants about the concerns of implementing accruals accounting in the public sector.
The concerns from the accountants need to be acknowledge and if possible solved to
make sure that the implementation process runs smoothly within the given time period.
Based on the result, this study proves that public sector accountants with the
knowledge of accruals accounting have a positive attitude towards the implementation of
accrual accounting system in Malaysian public sector. This is because they can perceived
the benefits of accruals accounting in achieving the objective of accountability and good
governance in managing public funds. Even so, in order to overcome the inadequate skill
competency among the public sector accountants, there is a need for comprehensive
training and ongoing skills learning and relearning to ensure benefits of accruals
accounting can outweigh the cost of implementing them in public sector accounting
system.
5.4 LIMITATION OF STUDY
There were several limitations in relation to the present study. In this study, most
of the respondents were public sector accountants with accounting knowledge. Therefore,
the opinions of those who are not from the public sector were not taken into
consideration. Some of the non-accounting staff is also part of the team in preparing the
governmental financial reporting and they might offer different sets of opinions.
58
Another limitation for this study is that information related to training is only for
descriptive purposes and not to investigate which type of training provided more benefit
to the accountants. This study only focused on two factors, which are the attitude of the
accountants and the amount of training provided but the study did not examine any other
factors that influenced the preparedness of accountants in implementing accruals
accounting in the public sector.
5.6 RECOMMENDATIONS
5.6.1 Results on Findings
The results showed that there were weaknesses in the management setting to
educate the employees on accruals accounting knowledge. Since the date for fully
adopting accruals accounting is due in early year 2015, there are still some employees
who did not go for any training on accruals accounting. The reason may be because the
employees resisted on changing towards accrual accounting. The management should
find out why they resist the change. Thus, the management should identify their problems
by distributing questionnaires or interviewing the employees on how to attract them in
participating with the implementation process by giving them a better picture of what
accruals accounting is about. Seminars and talks on accruals accounting can give them
the information but it all depends on the employees’ willingness to participate.
Besides, as mentioned by Salleh and Pendlebury (2006), the Malaysian
government provides incentives for its accounting employees to obtain professional
qualifications. This can be a motivation for the accountants to improve their knowledge.
The non-accounting staff should be provided with other incentives because they are also
part of the accounting team in the governmental financial reporting. Example of incentive
is such as sending them to undergo a training programme on basic of accruals accounting
fully sponsored by the government.
5.6.2 How to Improve the Methodology
59
The present study used questionnaire as its method of collecting data. The
respondents were required to choose the answers that suited their best interest. But this
method failed to identify the reason of why the respondents chose the answer. It is
suggested that to get the actual response and the opinion from the respondents regarding
the implementation of accruals accounting in the public sector, interview should be the
suggested method. Thus, problems such as why the employees resist and ways to
overcome the problem in lifting the implementation barriers should be given importance
and solved. Further research on the cost and benefit analysis of the accrual accounting
implementation in public sector is suggested.
The sizes of sample also need to be increased and accountants from other
departments should be included in the study too. It is recommended for future researcher
to examine the attitudes of non-accounting staff who is involved in preparing the
governmental accounting. Plus, to investigate further on other factors that may have
influenced the accountants’ preparedness in implementing accruals accounting in the
public sector such as the applicable of system software, regulation and guidelines, and
top management support. It is also suggested for future researcher to conduct a study on
how to mitigate the implementation barriers prior to the implementation phase. In
addition, the future research can also assess the acceptance from the users of
governmental financial information and if they are prepared in using the accruals based
financial reporting.
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APPENDICES
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