Disclosures of Materiality: The Practice of Malaysian Companies

Takiah Mohd. Iskandar, Syed Mohd. Ghazali Wafa Syed Adwam Wafa, Selamat Kundari, Rosiati Ramli

Abstract


The reporting of information in the financial statements is pervasively based on the materiality concept. For the purpose of disclosing financial information, auditors use their professional judgments in deciding the appropriate materiality thresholds. There is evidence of a lack of consensus in disclosure thresholds that researchers and practitioners believe to have arisen from the absence of a clear guideline on materiality. This study uses an archival approach to provide empirical evidence of materiality thresholds for the disclosure of financial informatzon among companies in the retall and finance industries in Malaysia. Results show that the threshold of a majority of the disclosed items being examined is very low (i.e., below 5% of net profit for the current year). The study found a significant difference in disclosure threshold between industries. The study suggests that specific guidelines on materiality threshold for different industries should be established for the disclosure of financcal items.

ARSTRAK
Pelaporan maklumat dalam penyata kewangan adalah secara keseluruhannya berasaskan pada konsep kematerialan. Untuk tujuan pelaporan maklumat kewangan, juruaudit menggunakan pertimbangan profesional dalam menentukan tahap kematerialan yang sesuai. Bukti menunjukan bahawa terdapat ketidakselarasan tentang tahap pendedahan yang para penyelidik dari pengamal mempercayai, disebahkan oleh ketiadaab garis panduan yang jelas tentang kematerialan. Kajian ini menggunakan pendekatan arkeb untuk memberi bukti tentang tahap kematerialan bagi pendedahan maklumat kewangan syarikat-syarikat dalam industri peruncitan dan kewangan di Malaysia. Hasil kajian menunjukkan bahawa berasaskan pada item yang diperiksa kebanyakan item tersebut adalah sangat kecil (iaitu, di bawah 5% daripada untung bersih tahun semasa). Kajian mendapati terdapat perbezaan yang signifikan pada tahap pendedahan di  antara kedua-dua industri tersebut. Kajian ini mencadangkan supaya suatu garis panduan yang khusus disediakan untuk memperbaiki ketiadaan konsistensi tahap kematerialan pendedahan item ewangan.


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