Accounting outsourcing practices in
Malaysia
Ruhanita Maelah, Aini Aman, Rozita Amirruddin, Sofiah Md Auzair and Noradiva Hamzah
Abstract
Purpose – Firms in Malaysia are in an enviable position in view of Malaysia’s standing as a leading
outsourcing hub in the region. Despite that, little is known about the accounting outsourcing practices,
risks and control in Malaysia. This paper aims to explore the practices, decisions, processes and
perception of risks and control in accounting outsourcing.
Design/methodology/approach – This paper is written based on survey data which were collected
using a questionnaire. The questionnaires were directed to the head of the accounts and finance
department of each company. A total of 51 companies participated in this study and approximately 47.1
percent of the respondents are involved in accounting outsourcing.
Findings – Findings show that the most common outsourcing activities are financial reporting and
auditing while the main reasons to outsource are quality service, core competencies and scale
economies. The decision to outsource accounting services is related to the type of industry and
expertise in the firms. Most of the firms outsource their preparation of account and audit work as well as
tax for better quality services. Firms rely more on formal contracts and concerns about confidentiality
and security of accounting data.
Research limitations/implications – Because of the limited number of responses, the findings may not
be generalized to the overall population. Nevertheless, they can be used as background information for
subsequent research in accounting outsourcing activities. Future research may consider the use of
in-depth case studies for understanding challenges in accounting outsourcing particularly in making
decisions, managing processes and mitigating risks.
Originality/value – While it can be regarded as exploratory, this study makes an attempt to uncover the
risks and control issues in accounting outsourcing. The findings will contribute to the body of knowledge
in accounting outsourcing and enhance the understanding of the current accounting outsourcing
practices in Malaysia.
Keywords Accounting, Outsourcing, Malaysia, Decision making, Process, Risks, Control
Paper type Research paper
Introduction
Outsourcing means subcontracting the strategic use of company’s resources outside the
company to perform tasks that are usually handled internally. In this knowledge- and
service-based economy, it is said that companies can increase their profits by strategic
outsourcing of intellectually based systems (Quinn, 1999). Quinn (1999) argued that
successful companies leverage their capabilities and the investments of others by exploiting
three areas of intellectual outsourcing: traditional service or functional activities performed
in-house (e.g. accounting, IT, or employee benefits); complementary, integrative, or
duplicative activities scattered throughout the company; and disciplines, subsystems, or
systems in which outsiders have greater expertise or capabilities for innovation. Hence,
while leaving the non-core activities or functions to specialized third parties, companies can
focus on their core competencies and improve overall performance. Outsourcing is one of
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VOL. 6 NO. 1 2012, pp. 60-78, Q Emerald Group Publishing Limited, ISSN 1558-7894 DOI 10.1108/15587891211191380
Ruhanita Maelah and
Aini Aman are both
Associate Professors, and
Rozita Amirruddin and
Sofiah Md Auzair are both
Senior Lecturers, all at the
School of Accounting,
Faculty of Economics and
Management, Universiti
Kebangsaan Malaysia,
Malaysia. Noradiva Hamzah
is an Associate Professor at
the School of Accounting,
Faculty of Economics and
Management, Universiti
Kebangsaan Malaysia,
Malaysia.
This study was financially
supported by Research Grant
University (UKM-GUP-EP-
07-16-119) and Fundamental
Research Grant Scheme
(UKM-EP-05-FRGS0054-2009).
Received: 6 December 2010
Accepted: 27 May 2011