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Payroll Liabilities Are Rare

payroll liability

Payroll Liabilities Are Rare

Various types of liabilities can occur in large-scale businesses and enterprises. Most of the liabilities are associated with payroll, especially in large organizations. Even if payroll liabilities are rare in your organization, you cannot neglect them because it will disgruntle employees and damage your business’s overall reputation.

 

Moreover, you and your company can be held accountable for violating payroll rules and regulations. If you want to avoid such issues and run a successful company without liabilities, keep reading this article as it discusses all the important aspects of payroll liabilities and why every company and accounting firm in Malaysia must consider them during the payroll process.

What are Payroll Liabilities?

Payroll liabilities are the payments associated with a payroll that a company owes but has not yet paid. It includes various types of payments, such as wages for the total number of hours an employee might have worked but have not yet received the payment for. Withheld taxes and other types of payroll costs are also included in payroll liabilities.

In most of the organizations, the vast majority of factors do not remain as payroll liabilities for an extended period of time. For example, if your company pays its employees once a month, the liability will not remain for a long time. Similarly, most of the companies set a certain taxation period, which will result in the removal of withheld taxes from the list of payroll liabilities.

Types of Payroll Liabilities

It is the responsibility of every employer to be familiar with the various types of payroll liabilities. They must be taken into account while budgeting to ensure your company does not run out of funds.

 

Moreover, once you clearly know the amount of money you must pay at a future date, an accounting firm in Malaysia will help you throughout the payroll accounting process and provide reliable HR services.

 

Here are the three main types of payroll liabilities:

1. Wages

The whole purpose of payroll is to pay your employees, which makes employee wages the most common type of payroll liability. The amount of money that you owe to your employees will be considered a payroll liability as long as you have not paid it to your workers.

payroll

2. Taxes

Taxes are a critical part of any payroll system. Accounting firms in Malaysia are familiar with the standard practices and regulations, which helps them in conducting smooth payroll accounting. Various types of taxes, like the state and income tax and other state-related taxes, are withheld by employers. They are considered payroll tax liabilities until you deposit them.

3. Services

Most businesses in Malaysia, especially large-organizations, have to hire an independent accounting firm for payroll and other HR services. The amount of money you have to pay for the accounting firm’s services and software is considered a liability until you pay it. Typically, accounting firms in Malaysia charge on a monthly basis.

There can be many other types of payroll liabilities depending on the company’s location, number of employees, and sector. Some companies have to handle employees’ health insurance and retirement funds as well, which are considered liabilities.

 

Businesses and accounting firms should always be familiar with the latest guidelines, as they are continually changing. Doing so will help avoid any issues and clear all of the payroll liabilities according to the rules and regulations laid out by the law.

Managing & Paying liabilities

If your company has a lot of employees, it can become quite challenging to keep track of the liabilities. It is not possible without an efficient and reliable payroll system. If your company is facing issues in payroll management, you should consider the HR services of an experienced and qualified accounting firm in Malaysia.

Independent firms can help you in better management of your payroll by creating and maintaining comprehensive records. It is important to ensure that your company is paying the payroll liabilities to the correct recipients. Wages are obviously paid to the employees, while taxes are given to the relevant taxation authorities.
payroll liability-1

In a Nutshell

Overall, managing payroll liabilities should not be a major issue for any organization. If businesses use a smart, efficient and organized method of payroll accounting, they will start enjoying massive benefits of better management and very few liabilities.


Other than using an effective payroll system, companies should also consider having a considerable amount of cash reserves to cover liabilities in case of a financial crisis. Setting proper reminders, making schedules to pay the liabilities and maintaining thorough records are some of the many ways to facilitate HR services in a company and help avoid payroll liabilities for a long time.


For more information, feel free to get in touch with us.

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Essential Accounting Update Post Covid-19 Lockdown

essential accounting updates

Essential Accounting Update Post Covid-19 Lockdown

Hiring an accounting firm in Malaysia is now more important than ever due to the severe uncertainties created by the COVID-19 pandemic. Many companies, particularly SMEs, have often underestimated the importance of experienced accountants and efficient accounting mechanisms as they are considered expensive.

 

However, the pandemic and subsequent economic crisis have enhanced the importance of accounting services in Malaysia, and this is the best time for all kinds of organizations to avail themselves of these services and develop post-COVID-19 lockdown strategies to recover their business.

 

An accounting firm can help you with better management and allocation of resources. Here are the top 5 reasons why good accounting services are essential after the lockdown:

1. Economic Relief Packages

Since the start of the COVID-19 pandemic, the Malaysian government has issued several economic relief packages. Moreover, the taxation guidelines are continually changing due to various exemptions and tax incentives given by economic stimulus packages like PENJANA.

 

It is hard for the organization to keep up with these evolving guidelines and ensure that they are using all of the government’s benefits. An experienced and qualified accountant will be aware of the entire application process and the best scheme suitable for your business.

essential accounting updates-1

2. Future Strategies

While creating and maintaining records is an essential part of any accountant’s responsibilities, it is not their only job. They help you in making plans and business strategies for the future. 

 

Needless to say, companies that have comprehensive financial plans and mechanisms in place to deal with different kinds of crises are better able to go through a difficult period with fewer damages. If you hire an accounting firm, it will help you make smart strategies for your business’s success.

3. Budgeting

Whether you are running an SME or large enterprise, you must spend a considerable amount of time and energy in budgeting. Proper allocation of the finances and other resources is critical for the success and sustainable growth of any business.

 

Accounting firms provide a variety of accounting services in Malaysia, which also includes budgeting. After the COVID-19 lockdown, you will have to reevaluate your entire budget to ensure your company can function properly, even if you have suffered massive financial losses and have limited cash flow.

4. Better Working Procedures

Poor financial management and having too many business decisions to make on a daily basis can result in poor performance of the company and reduce revenue. On the other hand, a company that utilizes accounting services and maintains it’s working procedures up to the highest standards are better equipped to deal with all kinds of financial issues.

The COVID-19 pandemic and the lockdown have certainly given a huge shock to the global economy and disrupted the majority of the companies’ working procedures. When an accounting firm is managing your finances and business procedures, there is a very good chance that your business will suffer fewer consequences and recover your finances quickly by relying on the advice of professional accountants.
essential accounting updates-2

5. Explore Opportunities

When you are running a business, you have to manage all of the departments of an organization and take a lot of strategic decisions daily. In such a stressful situation, it is quite understandable that you will not have the time to explore numerous business growth opportunities. For example, most industries are still suffering due to the pandemic and economic uncertainty, while the medical and pharmaceutical industry is enjoying a huge boost. There are a lot of business opportunities cropping up in the health industry.

Accounting firms in Malaysia have experts who are familiar with the condition that different industries are in and will be able to evaluate such opportunities, develop business plans, and ensure that you have sufficient capital to invest. In short, you can quickly obtain fully researched and developed business plans for further expansion. After the COVID-19 lockdown, you will need such strategies to support your business and explore other ways of generating income for your business.

In a Nutshell

These are some of the many reasons why you should avail of independent, experienced, and professional accounting services in Malaysia. Accounting firms and chartered accountants are capable of handling many types of financial problems.


In fact, it often happens that a business is facing issues related to financial statements, payroll accounting, and other HR services, and does not realize that a good accountant can easily solve these problems. So if your business has taken a hit due to the lockdown and you are looking for ways to quickly recover, you should definitely consider hiring an accounting firm.


For more information, feel free to get in touch with us.

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Why is payroll accounting an important part of your organization?

payroll accounting
close up man hand press on calculator counting calculating about monthly expense from debt bill at the table in home office and managing payroll,money risk financial concept

Why is payroll accounting an important part of your organization

It should go without saying that every company that has employees must have payroll, whether it is a small company or a large international corporation. The payroll process is not completed without efficient accounting practices. In fact, if a mediocre payroll system is put in place to just fulfil regulations, it will ultimately damage the company irreversibly.

More than 50% of the company’s revenue is allocated for employee compensation and benefits. Such statistics are more prevalent in large organizations that have a high number of employees. The non-manufacturing sector, especially, spends a lot of capital on human resources and HR services. Therefore, it is important to develop and implement reliable and stable accounting procedures.

What is Payroll Accounting?

Payroll accounting involves calculating and distributing compensation for the organization employees. Most small and family-owned businesses are able to manage their payroll and accounting requirements on their own. However, large local organizations use the services of accounting firms in Malaysia, because such firms are very familiar with legal and standard accounting practices and can easily manage the payroll of large-scale business.

 

Even though payroll accounting seems easy to many people, it is actually a complicated and complex procedure that must be performed according to a certain set of rules and regulations.

 

Factors like overtime, employee benefits, and taxes have to be considered in payroll accounting. When you hire an accounting firm in Malaysia to manage your payroll, its first task would be to collect accurate and comprehensive data about the employees and the duration for which they have worked for the company. Moreover, it is important to make it clear whether the employees are paid on an hourly or monthly basis.

 

If the employees have a fixed monthly salary, they will begin at a base rate every month. At the end of the month, the accounting firm will adjust the monthly salary according to overtime, bonuses, or any possible pay deductions due to leave or any other reason. Generally, managing salaried employees is much easier than managing hourly employees.

payroll

For the hourly employees, the organizations must have a suitable system in place that would track and keep a record of the total number of hours an employee is working. Hence, it is highly recommended that large organizations hire an accounting firm in Malaysia for better, reliable, and efficient payroll accounting.

 

Hourly employees usually work for a different number of hours every week. Most companies ask them to record their own working hours. Large organizations now usually adopt electronic systems and independent firms for employee management. Once the records of all the employees are properly compiled and maintained, accurate compensation is calculated.

 

The accounting firms in Malaysia have experienced accountants. Such firms ensure maximum precision and accuracy in the payroll process and improve the overall efficiency of the companies.

Importance of Maintenance

It is important to note that the role of accountants and payroll officers is not only restricted to inserting journal entries and compensating the employees. Proper maintenance and reconciliation of the accounts is another critical role of an accountant. In case of any errors in the record, it is the responsibility of the accounting firm to reevaluate the entire process and find the cause of the error or financial discrepancy.

Reconciliation of the accounts means the accountants have to justify and explain the closing balance in any of the control accounts. Such an explanation is given in the form of bank statements, financial statements, or any other supporting documents for specific entries and overall accounts. In the case of a liability, sufficient documents must be presented as well.
payroll accounting-1

It shows that payroll accounting is essential to maintain thorough records and to avoid any financial crisis that occurs if the records are not properly maintained. Accounting firms in Malaysia can enhance the overall performance of large organizations by taking over the huge responsibility of payroll accounting.

 

It allows the enterprises to focus on other aspects of the company and stop worrying about maintaining a payroll system all by themselves. Ultimately, the quality of HR services and management is greatly improved.

In a Nutshell

It would not be wrong to state that the bigger a company is, the more complex its payroll process will be. A large-scale organization often finds it challenging to maintain proper records of all of its employees and to compensate them in a timely manner.


Hence, independent accounting firms in Malaysia offer payroll accounting and HR management services that allow companies to enjoy efficient payroll management and minimize financial discrepancies.


For more information, feel free to get in touch with us.

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Understanding the Difference between Cost Accounting and Management Accounting

Two women discussing new contract
Two women discussing new contract

Understanding the Difference between Cost Accounting and Management Accounting

Numerous different aspects and types of accounting must be considered by organizations for accurate and comprehensive auditing. Accounting firms in Malaysia provide a variety of accounting services dependent on the type of organization and requirements.

 

The two main types of accounting are cost accounting and management accounting. While these terms may seem similar to many people, there are stark differences in them.

What is Cost Accounting?

Cost accounting is a type of accounting that aims at producing information to regulate an organization’s operations for maximum profits and efficiency. It is also known as control accounting. In a cost accounting system, cost books are produced from the data obtained from financial accounting at the end of an accounting period.

What is Management Accounting?

On the other hand, management accounting is a branch of accounting that helps management in planning and decision-making. It is also called decision accounting. Data from both cost accounting and financial accounting is collected for management accounting. The obtained data is analyzed and interpreted to prepare reports and provide essential information to companies.

Both of these types of accounting are an essential part of accounting. They are necessary to be able to run an organization smoothly and efficiently. The data obtained from these accounting systems is used to analyze the overall financial health of an enterprise and make smart future decisions and policies.
financial inspector and secretary making report

Differences Between Cost Accounting and Management Accounting

The key differences between management accounting and cost-accounting are:

1. Data Handling

Cost accounting is associated with the recording and analysis of cost data. Management accounting is used by the management of a company to produce information for better management.

2. Results

Qualitative information is obtained as a result of cost accounting. On the other hand, management accounting gives both qualitative and quantitative data.

3. Sub-Type

Cost accounting is an essential part of management accounting. In Malaysia, when an accounting firm is hired by a large organization, it will conduct both cost accounting and management accounting to give complete information to the organizations.

4. Aims and Objectives

Cost accounting’s main goal is to determine the cost of producing a product and calculate profits. It is done to make a short-term strategy. On the other hand, management accounting’s primary objective is to obtain information for management to set goals and future working procedures. It is performed to create a long-term management strategy.

5. Rules and Procedures

There are specific rules, procedures, formulas and guidelines that must be followed while doing cost accounting, while there are no specific set of rules for management accounting. Every firm conducts management accounting according to its own rules, working conditions and requirements.

6. Scope

Cost accounting’s scope is restricted to cost data. It usually involves cost computation, cost control and cost reduction for maximum profits. Management accounting, however, is a broad type of accounting that covers areas like budgeting, taxation, planning, decision making, risk management, making strategies and the analysis of future trends.

7. Impact of Cost

Cost accounting deals with the majority of aspects of cost, such as allocation, distribution and thorough auditing. Management accounting studies the impact of cost on management operations.

8. Planning

Short-term planning is focused on cost accounting, but management accounting deals with both short- and long-term planning. High-level tools and techniques, such as probability structure and data sensitivity analysis, are used in management planning for accurate planning.

9. Prerequisite

It is not possible to perform management accounting without cost accounting. However, cost accounting is independent of any other type of accounting and can be performed without any prerequisites.

10. Future Decisions

Cost accounting provides the information necessary to make a future cost-related decision from evidence-based historical cost data. On the other hand, historical and predictive data is used for future decision making in management accounting.
working in cardboard manufactory

In a Nutshell

Management and cost accounting systems play a critical role in the internal management of a company. Cost accounting has a quantitative approach, while management accounting is focused on both quantitative and qualitative data.


Cost accounting helps minimize any extra expenses, and management accounting is necessary for strategy formulation and setting goals.


In short, it could be said that cost management is a management accounting sub-type because it is not possible to conduct management accounting without the collection and analysis of cost-related information.


To maximize profits and make smart future decisions, it’s essential for large organizations to manage their finances efficiently through an experienced accounting firm in Malaysia.


For more information, feel free to get in touch with us.

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Financial Reporting Implications of COVID-19

Young businesswoman preparing for business meeting
Young businesswoman preparing for business meeting

Financial Reporting Implications of COVID-19

The COVID-19 pandemic has adversely affected the global economy. All businesses and organizations have been affected by this crisis in one way or another. While companies are trying their best to design effective strategies to smoothly run their business in these new conditions, there is mounting pressure from investors and stakeholders for complete financial transparency and information.

 

Not every enterprise is able to perform sustainability reporting internally in such difficult times, and therefore accounting firms in Malaysia are helping organizations to maintain financial transparency.

 

Tax regulators, registration authorities and audit and accounting firms have adopted modern tools and technology to help organizations and are guiding them through the process of sustainability reporting. There are five major financial reporting implications of COVID-19:

1. Liquidation and Going Concern

Investors and the management of the majority of businesses are understandably concerned about the survival of companies in these harsh financial conditions. A major concern is that due to low sales and investment, businesses will not have enough cash to survive in the next few months, or for even a year until the COVID-19 vaccine is produced and things start getting back to normal.

During sustainability reporting and preparing accurate financial statements, accounting firms have to assess the organization’s ability to continue as a going concern. Due to the COVID-19 pandemic, assumptions about going concerns and future predictions will also have to be modified for the accurate financial assessment of a company.

 

Accounting firms will have to consider the current and anticipated impact of the coronavirus on businesses. All of the assumptions, uncertainties and predictions must be made a part of the sustainable report.

2. Impairment assessment

An impaired asset is the one whose values is irrecoverable by the company, either by selling it or using it in future projects. Impairment assessment is a critical part of sustainability reporting. It means that every company must assess the impairment of their nonfinancial assets at the end of the reporting.

Due to the coronavirus outbreak, many businesses have to shut down their manufacturing plants temporarily. Similarly, there are strict travelling, import/export and working guidelines which have led to a decline in business for the majority of industries, which could be considered a sign of impairment.

To generate an accurate financial report during the COVID-19 crisis, organizations should find out their assets’ recoverable amount, which is the combination of the estimated future cash flow and variations in cash flow. The predicted cash flow will indicate the company’s estimate of the economic conditions that will prevail throughout the asset’s life.

 

Uncertain economic conditions, like in this pandemic, will make forecasting cash flows quite challenging. Companies need to release complete information and the evidence they use to predict future cash flow.

group of business people in the meeting

3. Changes in Legal Agreements

No one could have predicted the COVID-19 pandemic and the economic destruction it has brought for many companies. Businesses are facing many cash flow challenges due to disrupted supply-chain, temporarily closing down of factories, a sharp increase in operating costs and lack of revenue.

 

Many organizations need additional financing to survive in the market. As a result, accounting firms in Malaysia must help organizations to conduct a thorough sustainability reporting and check if there is a need for making any changes in the legal agreement to obtain financing.

4. Measuring Fair Value

As part of sustainability reporting, organizations are required to measure a few of their assets and liabilities at fair value. It is an estimated exit price based on the assumptions about prevailing market conditions.

During fair value measurement, accounting and audit firms should make use of both the known and unknown factors of market conditions.  The impact of the evaluation is dependent upon the severity of the COVID-19 pandemic on your company and overall market conditions.

 

Since there is a lot of uncertainty involved, firms will have to mention all the assumptions made and evidence used to measure the fair value in the sustainability report.

5. Tax Incentives

The government and tax authorities are trying to mitigate the impact of the coronavirus on the economy by helping businesses through with relief packages, tax incentives, direct subsidies, minimum public levies, rental reductions and low-interest loans.

 

An experienced and qualified accounting firm in Malaysia will be aware of such measures applicable to specific companies and can help organizations in guiding them towards such schemes. They have implications in financial reporting as well. Firms must show all the relief measures utilized by organizations.

Bank Negara Malaysia

In a Nutshell

The whole world is going through turbulent times as the COVID-19 pandemic has disturbed the whole structure of the world. Undoubtedly, many companies are suffering due to the worsening economy and their investors are also getting anxious.


A transparent and thorough sustainability report can play a vital role in bridging the communication gap between companies and their investors. It can also help stakeholders maintain trust in the business and collectively overcome this crisis.


For more information, feel free to get in touch with us.

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What You Need to Know About Financial Statements?

Close up of a man calculating his financial bills
Close up of a man calculating his financial bills

What You Need to Know About Financial Statements?

Financial statements are an essential part of any business. They are the complete representation of your business’s financial health because it concerns the sources of your money, where it is being invested and the remaining money you have. They help in strategizing the future of the organizations and making smart moves.

 

Moreover, financial statements are needed when drawing up legal contracts, making loan applications, reporting on sustainability and while attracting investors.

 

There are many accounting and audit firms in Malaysia that help businesses, especially large organizations, to prepare a thorough financial statement for complete financial transparency.

 

It is important to familiarize yourself with different aspects of financial statements. Let’s start with the basics.

What are Financial Statements?

Financial statements are reports that give details about the finances of an organization. Whether it is a new company or a well-established enterprise, every type of business must maintain financial statements and be familiar with the reading and analysis of these statements. There are three main parts of a financial statement:

  1. Balance Sheet
  2. Income Statement
  3. Cash Flow Statement

In combination, these statements give a complete and clear picture of your organization’s financial health. It will tell you how much money is being invested in a project, the amount of debt owed, monthly income, investment expenses and other important financial details.

1. Balance Sheets

A balance sheet is a summary of your current business finances. It contains information about the assets your organization owns and the liabilities (or debts) you owe at the time of the creation of the balance sheet.

 

The frequency of balance sheet generation varies from business to business, depending on the organization’s requirements, type of company and level. Some businesses prefer to do daily or monthly balance sheets, while some do it only once a year.

A large organization that has to deal with a lot of money on an everyday basis usually prefers to prepare a balance sheet on a daily or weekly basis to prevent corruption, embezzlement and other financial errors. For example, banks prepare a balance sheet every day to keep a comprehensive record of the money.

 

If your organization has hired a competent accounting firm in Malaysia, it will be responsible for looking after the financial statements and documents of your company.

list of financial statement

A balance sheet has three main parts:

  • Assets
  • Liabilities
  • Equity (Equity = Assets – Liabilities)

2. Income Statements

An income statement is also called the profit and loss statement of a company. It tells you how profitable your business was over a certain period, such as a month or year. The accounting period depends on the accounting firm you might have hired and the agreement you have with that firm.

 

The income statement is a clear description of how much money you made and how much you spend, meaning it gives information about both revenue and expenses.

3. Diverse Reporting

Not every financial statement needs to fit into a specific type. Instead, there are numerous other types of financial statements being used by different organizations. Experienced investors and audit firms in Malaysia will have no problem in understanding different financial statements.

 

It is also possible that an organization has the same type of financial statement but a different approach to data presentation. It simply means that diverse types of businesses produce diverse presentations of the financial statement.

 

The balance sheet, especially, varies a lot from business to business. Comparatively, income statements and cash flow statements do not vary much.

Importance of Financial Statements

Financial statements allow you to quickly analyze your net income, cash flows and any debt your organization might have. Similarly, a summary of past trends is included in financial statements. Future strategies can be decided on in order to maximize profit and reduce debts based on the collected a

They are an essential tool for optimizing the financial performance of any organization. Investment in various assets is made based on the results of a financial statement. Similarly, the complete financial history of a business is critical in securing a loan. If your company has obtained loans from multiple lenders, they should be mentioned in financial statements.
accounting and calculating

In a Nutshell

Financial statements are prepared using the collection and comprehensive analysis of financial data. Their importance cannot be denied for various reasons such as maintaining financial history, applying for different loans and complete financial transparency to avoid any legal issues.


While small businesses can easily prepare their own financial statements, larger organizations should hire an accounting or audit firm in Malaysia for thorough bookkeeping, preparing financial statements, analyzing them and suggesting future strategies.


For more information, feel free to get in touch with us.

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Overcoming Site Visit Limitation for Auditing During A Pandemic

meeting in office with mask on

Overcoming Site Visit Limitation for Auditing During A Pandemic

The COVID-19 pandemic has created new challenges for many industries. Auditors are also facing many problems in site visits due to the authorities and various organizations’ strict social distancing guidelines and safety measures.

 

It is noteworthy that audit firms in Malaysia are not as crippled by the coronavirus crisis as many businesses, such as hotels and the entertainment industry. Accounting services are provided in Malaysia through various physical proximities to fulfil the auditing task of large organizations.

 

In such unprecedented times, auditors are adopting new tools and techniques to minimize the impact of the coronavirus on Malaysia’s accounting services. Modern approaches like state-of-the-art technology and remote auditing are being used by auditors. Remote auditing was used by many audit firms in Malaysia before the pandemic as well.

 

Due to COVID-19 and its related travel restrictions, strict safety measures and the need to conduct an audit and legal regulations, the importance of remote auditing is becoming more prominent to overcome the limitations of site visits.

 

Many organizations have also specifically asked their audit and accounting firms to turn to remote services for better services in these challenging times. The days are long gone when auditors had to maintain a vast book of records and update it manually. Nowadays, certified public accountants (CPAs) can perform more efficient accounting and auditing via rapidly growing modern technology and tools. Technology has sped up the auditing process and made it more efficient.

 

Certain standards should be followed by auditors, while remote auditing ensures it produces efficient and accurate results. A major difference between remote auditing and site auditing is that site auditing produces direct evidence while remote auditing gives derived documents and data. With proper resources like an excellent telecommunication system and data collection measures, remote auditing can be as reliable as traditional on-site visits.

work from home

Some of the other characteristics of remote auditing are:

1. Walkthroughs

The purpose of walkthroughs is to get evidence of transactions, or usually a group of dealings in a large organization. All of the data regarding the negotiation process, authorization, processing of contracts and final transaction reports are collected.

 

It involves inquiring, observing and examining the contracts and deals of a company. Such procedures can be easily performed via videoconferencing.

2. Inspection of Facilities

Inspection and examination of facilities can be performed through video or photographs in remote auditing. In fact, it will be much faster than the on-site auditing because it produces media evidence of the auditing which the audit firms can keep in their records.

 

A real-time video call can be made to one of the people on the facility, and a thorough inspection can be done.

3. Fixed Asset Testing

Fixed asset testing is a significant part of auditing. It involves testing the management’s declarations associated with existence and completeness. Existence testing can be remotely conducted via video or photographic means to prove the reliability of on-site presence and ensure the accuracy of adopted measures at the site.

 

Analyzing and reporting outputs, verifying audit procedures and confirming the asset’s existence can also be performed remotely via unique identifiers.

Completeness testing can be done through a video tour of warehouses or organization premises. Auditors can perform live test counts or choose a particular section for the analysis of evidence. It is also critical that auditors ensure the highest audit standards are being implemented while remote testing and remove any kind of audit risk it might have during completeness or evidence testing.

4. Resources

Another noteworthy feature of remote auditing is that the organization must provide all the available information, resources, representations and required authority and access to auditors to conduct a comprehensive audit and maximize its chances of being successful and accurate.

an Asian female work from home

To fully overcome the limitations of a site visit during this pandemic, audit firms in Malaysia should adopt the common aspects of any type of auditing. These are:

  • This is essential for a successful auditing process. Every phase of the auditing should be separately planned to ensure maximum results.
  • Document review. This is important to ensure an organization complies with all the required legal requirements and regulations. Reviewing in remote auditing may take longer than on-site auditing because documents will have to be uploaded online.
  • Site inspection. This should be done via video stream.
  • Interviews with management. These can easily be conducted online.

In a Nutshell

Ultimately, organizations should keep in mind that remote auditing can sometimes be difficult to perform due to limited resources, compared to a site visit. However, many audit firms in Malaysia are implementing new strategies and tools for the best accounting and audit services.


With these firms’ cooperation and efficient utilization of the available resources, the site visit drawbacks can be overcome through proper remote auditing.


For more information, feel free to get in touch with us.

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Optimizing Losses During a Pandemic from Transfer Pricing Perspective

Optimizing Losses

Optimizing Losses During a Pandemic from Transfer Pricing Perspective

It has been about six months since the coronavirus pandemic started and it has affected the world economy in various ways. Along with numerous efforts and stimulus packages, the Malaysian government and the central bank are working hand in hand to minimize the impact of COVID-19 on the economy.

 

Many of the businesses are being asked to operate within the same old transfer pricing rules which have really affected the organization’s growth and working procedures.

The majority of companies are affected by the COVID-19 pandemic because the supply chain and production have become affected by the crisis. New market trends are indicating that parent companies of local brands are at a higher risk of suffering financial losses.

If your business has also been affected by COVID-19 and the MCO (movement control order) period, read on to find out more about some implementable tips and solutions to common issues being faced by companies. Challenges associated with tax treatment, loan schemes, rapidly changing rules and regulations of the working environment, and other tax subsidiary schemes are prevalent among businesses in Malaysia.

Determining the Losses for Transfer Pricing

In recent years, transfer pricing has become an essential concept for multinational enterprises (MNEs). Such large organizations depend on transfer pricing documents to implement a return on the sales pricing model for local branches.


Malaysian tax authorities also prefer the transfer pricing model when they provide a possible financial upside. However, during increased financial risk and low sales, such models are not preferred.

Optimizing Losses-1
There is no definite answer to the question of whether losses should be shared among all local branches of an MNE. It depends on the type of MNE and the nature of the losses suffered by the company. The COVID-19 outbreak has led to losses in many departments of businesses, and such losses were not predicted at the start of the year.

Through transfer pricing, Malaysian companies should find out the loss and recovery period and make strategies to overcome the losses as soon as they can. The MNE can decide the nature of the analysis depending on their business sector and scale. Generally, a thorough review of the industry, financial records, future projects and the latest trends need to be examined in order to come out of the loss period stronger and better.

Another major part of transfer pricing documentation should be the research and comparison of competing businesses in specific markets. It is important to compare the effect of the economic crisis on different markets and find out some common steps that can be useful to implement throughout the business sector.

Financial Impact

After examining the impact of COVID-19 pandemic and economic challenges on a whole organization, it is highly recommended that you determine the effect on each entity of a company.

 

In other words, separate teams should be responsible for conducting the financial analysis of different departments of an organization and create thorough transfer pricing documentation in compliance with the regulations of transfer pricing in Malaysia.

 

Other than the usual strategy of comparing the results of financial analysis with other companies in the market, your business should focus on equating the results with a maximum unaffected business period. It will clearly indicate the losses suffered by your organization.

 

It is also important to note that most companies have to bear a higher amount of money spent on selling, hiring, marketing and administration during an economic downturn.

 

Even though businesses do not require the same number of assets to run their businesses during a crisis, they are still legally bound to certain obligations like leases, salaries and offices rent. Such legal contracts cannot be changed on a short-term basis, and hence, the companies continue to suffer losses due to minimum profits and regular responsibilities.

Optimizing Losses-2

In a Nutshell

By the end of the COVID-19 pandemic, the economy of Malaysia will be completely transformed, just like the rest of the country. Many organizations will have to rely on loans provided by the government. Large organizations, in particular, may have more transfer pricing implications linked to the circulation of cash handouts within the numerous subsidiaries under the control of an organization.


Large-scale companies are under a lot of pressure to act quickly and form strategies to control the effects of COVID-19 on the business and its partners. However, it is also essential that such actions fulfil the requirements of transfer pricing documents as failure to accomplish transfer pricing policies in Malaysia can lead to severe tax-related issues.


Business owners need to find a balance between quick and effective change to ensure their strategies are beneficial for the company and economy in the long-term.


For more information, feel free to get in touch with us.

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The Effects of Covid-19 on Sustainable Reporting

The Effects of Covid-19

The Effects of Covid-19 on Sustainable Reporting

Businesses are being scrutinized all around the world, including Malaysia, in the wake of the COVID-19 pandemic. The crisis has brought the importance of transparency and sustainability in business development to the forefront.

 

There are two main things that people are asking about large organizations: how are they controlling the effect of the pandemic and what should their response be to such a possible crisis in the future?

 

Sustainability reporting is a report that is published by organizations to give details about the impact a company is having on the environmental, social and economic structure of the society.

 

Some companies are struggling to come up with modern techniques for efficient sustainability reporting. Here you can discover some of the sustainability reporting trends being observed in Malaysia and other countries.

  1. The coronavirus pandemic has taken businesses by surprise. No business was ready for this huge crisis in terms of financial or reporting purposes. As a result, many organizations are modifying reports released in December of 2019 and adding some statements about coronavirus. Webpages and other such platforms are also being updated.
  2. Investors, stakeholders, and experts are keeping a close eye on upcoming sustainability reports. Many financial dealings are highly dependent on these reports because investors are not comfortable in making massive investments in these uncertain times.
  3. Social impact in sustainability reporting is more important than ever. Constant reporting is done about the treatment of employees by companies. Many investors, employees, and even employers of competitive organizations are gathering information about the handling of the employees in such unprecedented times.
  4. Financial reporting is a huge part of sustainability reporting, just as in previous years. Accounting and audit firms are helping different companies in Malaysia to release transparent financial records and determine the losses suffered due to the current pandemic. Moreover, data is being collected about possible future trends and strategies are being made on the basis of these projections.
  5. Due to the severe economic downturn, investors are demanding complete transparency, reliability, and consistency in company records. Managing the impact of COVID-19 on the company remains the top priority of business owners, and the significance of this cannot be underestimated. Investors are expecting companies to do thorough reporting and release records, even if with a little bit of delay.
The Effects of Covid-19-1

EU’s Efforts towards the Green Deal

Recently, the European Union has urged countries to go green and implement some drastic changes to protect the environment. A letter sent to environment ministers also urged large corporations to release their sustainability reports. Despite the setback suffered due to the coronavirus pandemic in European countries, they have remained committed to the implementation of the Green Deal.

Some CEOs and executives of leading worldwide corporations have responded positively to such efforts.

Kara Hurst, Head of the Worldwide Sustainability at Amazon says that the world’s number one eCommerce store is working continuously to provide the best service to the customers while being safe for the environment and protecting individuals. Amazon has implemented strict policies to curb the spread of the virus and protect the health of both workers and clients. 

 

Hurst also stated that air pollution is dropping massively due to social distancing guidelines, which gives a small glimpse into the carbon-free future.

The Effects of Covid-19-2

In a Nutshell

Even during the coronavirus pandemic, all business owners need to remember that the primary purpose behind sustainability reporting is to ensure to stakeholders that their business is functioning efficiently, legally and sustainably. If there are some issues being faced by companies, they must be reported as well, so that executives can make intelligent decisions based on the transparent and trustable data present in sustainable reports.


In this regard, accounting firms in Malaysia can help you to conduct a thorough analysis of the company and prepare a comprehensive sustainability report. Similarly, accounting firms specialize in the producing and bookkeeping of financial records.


One could argue that sustainability reporting is more critical than ever because every business expert, owner and investor need to fully know the impact of COVID-19 on the sustainability of a company and make strategies to move on from this adverse crisis.


For more information, feel free to get in touch with us. 

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Malaysia’s Reopening Business And How It Helps National Stability

Reopening Business

Malaysia's Reopening Business And How It Helps National Stability

2020 has been a challenging year for the world. The advent of the novel coronavirus has impacted humans in diverse ways; one of which is the closure of businesses. Businesses all over the world, including Malaysia, are forced to shut down as a means to curb the spread of the deadly virus. However, the imposed stay-at-home order has affected not just the small, medium, and large businesses but the economy as a whole.

The idea to close down virtually all sectors of businesses have stagnated the Malaysian economy. As a result, business operations has diminished, supply chains have weakened, cash isn’t flowing as it ought to, and export markets are at risk of loss. All of these have contributed to the instability of the economy. What then could be the solution?

Reopening businesses

The coronavirus pandemic has caused panic in the minds of employees and employers alike with many businesses having to close down for months now. A lot of industries that could not afford to offer a wage cut for their employees are forced to take a more drastic approach that would increase the rate of unemployment. Many were destined to lose their jobs if businesses were not opened.

With a total of 6, 353 confirmed cases and 4, 484 recoveries as of May 4, 2020, anyone can give the Malaysian government credit for controlling the outbreak of the virus. With this statistic, the government is confident that reopening various economic sectors will help national stability. However, this has to be done under the conditional movement control order (CMCO).

 

Fortunately, the movement control order (MCO) which was imposed sometimes in April 2020 proved effective in preventing the wave of infection.

Reopening Business-01

Now that the government has allowed accounting firms and other businesses to resume operation, the post-MCO phase would be implemented to ensure the safety and wellbeing of employees in their various working environments. This implies that the return to work will be a gradual process, backed up with standard operating procedures that will prevent further spread of the virus.

The government only hopes this would revitalize businesses and ensure that every sector remains sustainable and competitive. And one great way to achieve this is through tax incentives in Malaysia.

 

Many organizations including The National Tech Association of Malaysia (PIKOM), have expressed how they feel concerning the decision of the government to reopen businesses. International Trade and Industry Minister Datuk Seri Mohamed Azmin Ali also said the reopening of the country will stimulate the economy and its sustainability, as well as guarantee the people’s wellbeing, which was affected by the outbreak of Covid-19.

 

While reopening businesses is a welcome development, will it guarantee people’s wellbeing? Well, Malaysia passes the six benchmarks set by the World Health Organization (WHO) to reopen an economy post-lockdown and they’ve also put in place strategic measures to curb the spread of the virus. After all, the government has to focus on lives and livelihoods.

 

The government has been working to sensitize citizens with SOPs (Standard Operating Procedures) that will ensure safe work conditions for employees. The main objective of this policy is to ensure accounting firms and all other private and public sectors, return to their various offices while complying with SOPs.

 

However, SMEs will be encouraged to stick with the social distancing rule until a vaccine becomes widely available. This may help alleviate some level of scepticism from customers as businesses seek to reopen.

 

While offices would be widely opened, working at home should be encouraged. When provided the right tools, employees can work via digital platforms. A good start would be to subsidize or give free broadband access and direct technical support to SMEs. Through remote working, SMEs would remain connected and also increase productivity and resilience.

Reopening Business-02

In Malaysia, the government should support SMEs as they have a lower budget to manage and respond to crises. Special attention should be placed to ensure retail firms, the electrical and electronics industry, and tourism sectors as they are majorly exposed to demand and supply shocks.

 

As the government gradually eases the lockdown for some sectors, tax incentives in Malaysia should also be employed as a means to encourage economic activity. By reducing tax payments for small and medium enterprises, Malaysian economic growth, as well as cash flow, will be increased.


All hope is not lost. Reopening businesses will help national stability, increase supply chain, and prevent subsequent job losses. Malaysia can remain hopeful as the chaos also provides a unique opportunity to transform and build a stronger and more competitive economy.


For more information, feel free to get in touch with us.

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