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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 i
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Page 1: The Preparedness

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

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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.

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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

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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

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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

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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

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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

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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

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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

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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).

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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

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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.

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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

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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.

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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.

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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.

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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

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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).

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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).

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FIGURE 2.1: CONTINGENCY MODEL OF PUBLIC SECTOR ACCOUNTING

INNOVATIONS

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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

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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

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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

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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

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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

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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.

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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

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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.

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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

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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

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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

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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

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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.

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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.

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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.

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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

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(-) 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’

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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

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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

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Figure 4.2: Qualification background

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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.

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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

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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

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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

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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

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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

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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.

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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

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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

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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

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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

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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

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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

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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.

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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

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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

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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

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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%

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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.

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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.

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Attitude

Frequency of training

Level of Preparedness

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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

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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

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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.

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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

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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.

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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.

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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.

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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

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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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