The development of SMEs and their potential contribution to the world economy Essay

Chapter 1


There has been considerable involvement in the development of SMEs, and in cut downing the inclination of failure because of the possible part to the universe economic system. Entrepreneurship through little concerns has been signaled as holding potency in the creative activity of sustainable development ( Tilley & A ; Parrish, 2006 ) and poverty relief in transitioning and developing states ( Morris, Woodworth, & A ; Hiatt, 2006 ) . SMEs are recognized worldwide as critical and important subscribers to economic development, occupation creative activity, and the general wellness and public assistance of economic systems ( Haron, 2001 ; Korsching & A ; Allen, 2004 ) .

SMEs are an built-in portion of the economic line of life of most states around the universe. They are a major beginning of thoughts and employment and they both sustain and stimulate the growing of national economic systems. Harmonizing to Schlogl ( 2004 ) , he stated that little and moderate-sized houses dominate our economic systems in footings of employment and figure of companies, yet their full potency remains unusually untapped. Although there is a wide premise saying that SMEs by and large has positive effects on state ‘s economic growing, the impression of economic jussive moods for SMEs remains mostly unseasoned.

Given the of import part of SMEs to national economic system, it is opportune to look into how the potency of this sector can be to the full harnessed. One suggestion is possibly to analyze how professional comptrollers can heighten the concern advisory services or non audit services to SMEs to do informed concern determinations ( PAIB Committee, 2005 ) .

Accountants have an chance to help in the development of SMEs because of their ability to supply the most frequent beginning of advice to SMEs ( Carter & A ; Mason, 2006 ) in add-on to supplying conformity services, in meeting such demands as those contained in revenue enhancement and company statute law. Accountants play a cardinal function in reding SMEs, particularly in affairs associating to ordinance and conformity ( Blackburn & A ; Eadson, 2006 ) .

Traditionally, professional comptrollers provided chiefly conformity type of services to SME clients. One cardinal service is audit services. However, there is an increasing tendency to present audit freedoms in many states ( Nor Azimah, 2002 ) . With the coming of an audit freedom government, it is critical to research whether professional comptrollers can supply more value added services to SMEs.

This chapter covers the background of non audit service, the job statement, follows by the research objectives, research inquiries, definition of cardinal footings, and range of the survey. These are followed by the significance of the survey and eventually the organisation of the staying chapters.

1.1 Background of Non-Audit Services

The issues on non-audit service have been discussed in accounting and scrutinizing profession since 1980s. In the past decennary, there have been more statements sing non-audit services ( NAS ) with hearer independent and non audit fee services with audit fee.

In general, non audit services are normally provided to the entity of which the house is besides an hearer. The hearer has a competitory advantage compared to other accounting houses, since they already have gained cognition while carry oning the audit services. As a consequence, this will cut down the cost for other accounting services. For illustration much of the information for fixing revenue enhancement conformity is obtained at the same time from the audit public presentation. ( Gill & A ; Cosserat, 1996 ) . Normally audit houses provide non-audit services such as revenue enhancement consultancy, direction advice, audience in fixing the companies account and using for fabricating licence. Harmonizing to research done by Lee ( 2003 ) , it was that, 92 % or about 1,400 audit houses in Malaysia are classified as little and average practicians ( SMPs ) and their chief beginnings of income are from audit services.

Teoh and Lim ( 1996 ) as cited in Shafie ( 2002 ) , found out that consultancy fees made up 20 to 30 per centum of the big-6 audit house gross. Even though the issue of the demand to command and supervise the non-audit services has been raised up by former Malaysian Institute of Accountant ( MIA ) president Haji Hanifah Noordin in 1990, but until today no serious action has been taken into consideration.

In subdivision 201 of the Sarbanes-Oxley Act 2002, it has been declared that houses are prohibited to take any specific non-audit service that may impair their professional independency ( SOX, subdivision 201, pp:772 ) , nevertheless many audit houses particularly Small Medium Practitioner still do so.

1.2 Background of SMEs in Malaysia

There is no recognized world-wide definition of SMEs ( Hooi, 2006 ) . In Malaysia, the definitions are entirely based on a fixed quantitative step ; for case the entire figure of workers, the entire figure of capital, entire assets and recently by finding gross revenues turnover ( Hashim and Abdullah, 2000 ) . SMEs in Malaysia defined harmonizing to employee size, gross revenues turnover and sectors. Definitions of SMEs in Malaysia autumn into 2 classs:

1. Fabrication, manufacturing-related services and agro-based industries

aˆ? Full-time employees non transcending 150 ; OR

aˆ? Annual gross revenues turnover non transcending RM25 million

2. Servicess, primary agribusiness and Information and Communications Technology ( ICT )

aˆ? Full-time employees non transcending 50 ; OR

aˆ? Annual gross revenues turnover non transcending RM5 million

In drumhead, an endeavor is considered an SME in each of the several sectors based on one-year gross revenues turnover or figure of full-time employees as show in table 1:

The authorities ‘s committedness and concern for the development of SMEs was made evident from the early 1970s with the debut of the New Economic Policy in 1971, which aimed to better people ‘s public assistance and restructure cultural economic instabilities. Furthermore, the authorities ‘s committedness to the development of SMEs can besides be seen in the 2nd Industrial Master Plan ( IMP2 ) , which will stop in 2005, followed by the Third Industrial Master Plan ( IMP3 ) , from 2006-2020, co-occuring with the state ‘s vision for 2020 ( MITI, 2005 ) . For illustration, the authorities has implemented legion policies and schemes under this program which was formulated to heighten the growing of the fabrication sector through the full value concatenation and to promote cluster-based industrial development. Hence, this program provides an incorporate attack to the development of industrial countries and chances for the growing of SMEs ( MITI, 2005 ) .

It is reported by the Malaysian Department of Statistics as in 2003, there were 523,132 entire constitutions in Malaysia which SMEs accounted the most for the sum of 99.2 % ( 518,996 ) . SMEs comprise of three cardinal economic sectors viz. fabricating, services and agribusiness. Micro constitutions constitute the largest figure with more than three quarters out of the entire SMEs formations. They are chiefly represented in the services and agribusiness sectors with the proportions for 80.4 and 93.3 per centum severally. Small companies make up to 18.4 per centum and medium companies 2.2 per cent. The fabrication sector besides displayed the same form nevertheless the per centum of micro houses was lower ( 55.3 per centum ) , while little houses accounted to 39.5 per centum ( Normah, 2007 ) .

Harmonizing to Khairuddin ( 2000 ) , SMEs in Malaysia may be categorized into three constituents ; ( 1 ) general concern, ( 2 ) fabrication and ( 3 ) agribusinesss. The general concern sector includes building, wholesaling and retailing, conveyance and storage, concern services and activities, and supplying services such as hotel and eating house. The chief activities in the fabrication sector consist of processing and production of natural stuffs. Meanwhile the agribusiness sector includes gum elastic, oil thenar, Paddy, coconuts, fruits, and veggies. From the three constituents ; the fabrication sector emerged as the most of import constituent for SMEs in Malaysia. Below are descriptions of the three constituents in item.

( I ) Fabrication Sector

In the fabrication sector, the largest figure consists of micro-enterprises ( 53.4 per cent ) followed by little sized class ( 38.1 per cent ) and in conclusion medium sized class ( 5 per cent ) . In footings of distribution by industry, SMEs were chiefly in the fabrics and dress and resource based industries. ( Census of Establishments and Enterprise, 2005 )

In respects to geographical location, Saleh and Ndubisi ( 2006 ) found that a huge figure of fabricating companies in Malaysia was located in the West Coast of Malaysia which is the industrialised location which is equipped with ports services. They found that Johor has the largest concentration of fabricating companies such as fabrics and dress and wood based industries with 17.5 per centum, followed by Selangor ( 16.7 per centum ) , Perak ( 9.4 per centum ) and Pulau Pinang ( 8.7 per centum ) . Johor led of the state due to the handiness of inexpensive labour and logging activities at that place.

( two ) General concern

In the general concern or service sector, approximately 449,004 out of entire constitutions were SMEs which constituted to 99.4 per centum. In the sector, 69.3 per centum of SMEs were in the distributive trade ( sweeping, retail and eating houses ) , followed by transit and communicating ( 6.2 per centum ) , fiscal mediators ( 4.3 per centum ) and professional services ( 2.5 per centum ) . ( Census of Establishments and Enterprise, 2005 )

Saleh and Ndubisi ( 2006 ) mentioned the list of activities for the transit and communicating sub-sector services were logistics and cargo forwarding services, storage and repositing, route draw, sea and inland conveyance, main road operations, messenger services, public coach conveyance, auto parking services.

Meanwhile, the professional sub-sector service is defined under the Malayan Standard Industrial Classification as ( 1 ) Non-technical related: legal, accounting, concern and direction consultancy, advertisement and ( 2 ) Technical related: architectural, technology, surveying and other proficient activities.

( three ) Agribusiness Sector

In the agribusiness sector, out of 32,397 active companies, 99.2 per centum were SMEs. Based on the SMEs entire constitutions, 65.8 per centum were in the planting, market plantation and gardening, followed by piscaries ( 20.9 per centum ) , domestic fowl agriculture ( 6.9 per centum ) and agricultural and carnal farming services ( 4.8 per centum ) . ( Census of Establishments and Enterprise, 2005 )

1.2.1 SMEs and Malayan Economy

SMEs play a critical function in the development of Malayan economic system. Their parts resulted large impacts to the economic system as a whole. SMEs are besides of import bargainers and service suppliers to primary industries. Furthermore, a big figure of SMEs are besides manufacturers of finished goods and services. Jointly, these SMEs contributed to the growing of fabrication, services and agribusiness sectors, every bit good as ICT services, in footings of end product, value-added, employment and exports ( Industrial Malaysia Plan, 2006 ) . Recent grounds shows that SMEs contributes to 32 per centum to gross domestic merchandise, 56.4 per centum to employment chances and 19 per centum to export ( SMIDEC, 2008 ) . Since SMEs in Malaysia merely contribute 32 per centum GDP over 99.2 per centum of entire constitution compared to 40 per centum GDP in other regional economic systems such as Thailand, Taiwan and Korea, this is proposing that there is a large room for Malayan SMEs to spread out their function ( SME Annual Report 2006 ) . Additionally, these Numberss did non demo much increase compared to 2003 as shown in table below:

The challenges and barriers confronting SMEs in Malaysia, forestalling them from turning farther and seting them in a critical place to confront the new challenges that are originating from globalisation, liberalisation and extended organisational, institutional and technological alteration. Abdullah ( 2002 ) has found that, the factors including little capital investing and low entree in adoption, low degree expert abilities and in natural stuff, low entree to needed substructure and low expertness in proficient and direction cognition. The Bank Negara study conducted in 2003, revealed that the SMEs participated have ranked competition from bigger participants, non able to obtain loan, non able to beginning skilled labour, competition from new entrant and deficiency of authorities support as their job. Harmonizing to SMIDP, 2001-2005 survey study ( SMIDEC, 2002 ) , SMEs in Malaysia are confronting many new challenges, domestically every bit good as globally. These challenges are intensified planetary competition, competition from other manufacturers, limited capableness to run into the challenges of market liberalisation and globalisation, limited capacity for engineering direction and cognition acquisition, low productiveness and quality end product, deficit of accomplishments for the new concern environment, limited entree to finance and capital, and the babyhood of venture financess in initial or mezzanine funding, high cost of substructure, general deficiency of cognition and information. However, Ting ( 2004 ) identified five cardinal challenges in peculiar: deficiency of entree to finance ; human resource restraints ; limited or inability to follow engineering ; deficiency of information on possible markets and clients ; and planetary competition.

The Government purposes by 2010 to increase SMEs part to GDP from 32 per centum to 37 per centum and their entire exports to increase from 19 per centum to 22 per centum and to use over 6.2 million workers by prioritising SMEs development. ( BNM Press Statement, 2007 and SME Annual Report 2006 ) Since SMEs part to the national economic system is still comparatively little, the Government has made the development of SMEs a high precedence country. This is reflected in the national development dockets, viz. the Ninth Malaysia Plan ( 9MP ) and the Third Industrial Master Plan ( IMP3 ) , in which the key schemes for SME development is outlined for 2006-2010 and 2006-2015 periods severally ( National SME Development Council, 2006 ) . From 9MP, a figure of preparation plans for SMEs were implemented to better their resource planning, direction capableness, fiscal direction and human resource development every bit good as upgrading their selling and proficient accomplishments.

1.3 Problem Statement

It is a good known phenomena that Small Medium Enterprise ( SMEs ) are important to a state ‘s economic growing and plays an of import function in finding the state ‘s gross domestic merchandise ( GDP ) . SMEs in Malaysia do non public presentation as expected because their facing many challenges and barriers. As highlighted by Wan ( 2003 ) challenges confronting SMEs in a globalised environment, for illustration, deficiency of funding, low productiveness, deficiency of managerial capablenesss, entree to direction and engineering, and heavy regulative loads, among many others.

Cameron, ( 1991 ) survey focused on what SMEs need to cognize and their general deficiency of fiscal accomplishments showing the positions of “ experts ” such as comptrollers, bankers, and attorneies. Subsequent survey has focused on the positions of SME operators ( Dyer & A ; Ross, 2007 ) , their relationships with the comptrollers and other concern advisers and the quality of advice they received from the comptrollers ( Jaffa, 2007 ; Watson, 2007 ) and Deakins, Logan, & A ; Steele, ( 2001 ) highlights the function of comptrollers in helping with webs, supplying advice on concern public presentation and guaranting larning takes topographic point for SMEs, particularly at the early phases of the concern life-cycle.

Most of the old survey chiefly in Malaysia ne’er examines the demand of non audit service sought by SMEs. Traditionally, professional comptrollers provided chiefly conformity type of services to SME clients. One cardinal service is audit services. However, there is an increasing tendency to present audit freedoms in many states ( Nor Azimah, 2002 ) . With the coming of audit freedom government, it is critical to research whether professional comptrollers can supply more value added services to SMEs

Previous research Information paper by Professional Accountants in Business ( PAIB ) Committee ( 2008 ) have indicated that SMEs in US need the relevant competences and accomplishments to pull off their concern which would include the accounting accomplishments, revenue enhancement and concern work outing accomplishments in order to sustainable in the long tally.

Accountants are challenged to reexamine their function in supplying services to SMEs with the position to make more ( Reeb & A ; Cameron, 1996 ) . It ‘s more liberated by Chaston & A ; Mangles, ( 2001 ) and Ram & A ; Carter, ( 2001 ) whose studies clearly indicate comptrollers need to be capable and be seen to be capable in the new services they offer. They should be converting in their offerings so possible clients have assurance that they are offering quality services.

Non-audit service is every bit of import as audit service because the duty is about the same as audit service and the consequence to accountant of lower quality service with may destruct the client and every bit good as the hearer professionalism.

Therefore this survey would wish to research the appropriate services needed by SMEs in Malaysia and the quality of NAS received by SMEs. The other aim of this survey is to analyze a group of successful SMEs and the type of non audit services ( NAS ) which they have sought from comptrollers.

1.4 Research Aims

To place the types of non audit services needed by successful SMEs

To mensurate the quality of services of Small medium Practitioners ( SMPs ) particularly in footings of dependability, confidence, tangibleness, empathy and reactivity.

To document the development of SME ‘s success from constitution to its current accomplishments.

To analyze the factors lending to the success of SMEs

To analyze the profile of the SMP which leads to the success of SMEs

To place the NAS which leads to the success of SMEs

To place other NAS needed by successful SMEs

To place the satisfaction degree of SMEs with the services that are presently provided by SMPs

To analyze the growing phase of successful SMEs

To place ways to increase ‘value added ‘ mechanism to the current services provided to SMEs

1.5 Research Questions

In order to accomplish the above mentioned aims, this survey will seek to reply the undermentioned research inquiries ;

What types of non audit services needed by successful SMEs?

What is the degree of quality service of SMPs particularly in footings of dependability, confidence, tangibleness, empathy and reactivity?

What are the successful developments ‘ achieved by SME ‘s from the twenty-four hours of constitution to its current place?

What are the factors lending to the success of SMEs?

What are the standard ‘s that enables SMP to take towards the success of SMEs?

What are the NAS which leads to the success of SMEs?

What are others NAS needed by successful SMEs?

What is the degree of satisfaction of SMEs with the services that are presently provided by SMPs?

What is the growing phase of successful SMEs?

How to ‘value add ‘ to the current services provided to SMEs?

1.6 Definition of Key Footings

In order to ease the authorship of drawn-out words repetitively, delight happen in the following some of the abbreviations that will be used in this survey and some of the cardinal variables used to analyse this survey.

1.6.1 Non-audit service

Harmonizing to Gill and Cosserat ( 1996 ) , non-audit services rendered by the accounting house that do non ensue in the look of an sentiment, negative confidence, a sum-up of findings or other signifier of confidence. The types of services rendered are accounting, revenue enhancement digest, direction consulting or consultative services and insolvency and concern recovery.

In this survey, the non-audit services refer to are revenue enhancement, accounting and direction audience, internal audit and other services that are related to accounting which are given by the audit house to the client besides the audit services. These are the most widely used service by SMEs.

1.6.2 Service Quality

Christopher ( 1986 ) cited that service quality is client interface and relationships by client. And service quality focused on the client ‘s experience during the procedure of the dealing. Lewis ( 1990 ) was besides stating that service quality is the focal point on run intoing client ‘s demands and demands and besides how good the service matches client ‘s outlooks.

In his research, Parasuraman, et Al. Zeithmal and Berry ( 1988 ) , have developed an instrument called SERVQUAL to mensurate client ‘s perceptual experiences and outlooks of service quality. Service Quality Dimensions

1. Tangibles: The visual aspect of the physical installations, equipment, forces and communicating stuff.

2. Dependability: The ability to execute the promised service dependently and accurately.

3. Responsiveness: The willingness to assist a client and supply prompt service.

4. Assurance: Assurance refers to knowledge and courtesy of employees and their a ability to animate trust and assurance

5. Empathy: Empathy refers to caring, individualised attending the house provides its client.

1.6.3 Performance

Fiscal public presentation

It is defined as the end products or results in use of resources. It is associated with organisational ultimate results in footings of one-year gross revenues return and growing, profitableness and return on investing as defined by Miller ( 1983 ) .

Non- fiscal public presentation

It is defined as the end products or results in use of resources. In this survey it is associated with organisation ultimate result in footings of the steps of end product and the repute of the company which are as used by Phutut ( 2002 ) in his survey.

1.7 Significance of Study

This survey is expected to lend to bing literature on non audit service provided by comptroller. This importance of this survey is to assist supply valuable counsel to the profession of comptrollers ‘ in order to increase their range of services towards the clients ‘ need apart from concentrating fundamentally on conformity and compulsory service.

This survey will supply some ideas for comptrollers ‘ to heighten their function and develop schemes after sing the factors act uponing the SMEs to obtain NAS from comptroller. Beside this, the survey will assist SMEs to obtain better understanding about ability of comptroller in assisting the company more expeditiously and successfully. The survey will besides help developmental bureaus such as SMIDEC and SME Bank to include the authorities sector in developing fiscal aid bundles to finance services and activities which would heighten the resiliency of SMEs in Malaysia. Finally the survey will supply information to do SMPs and SMEs to be more competitory and able to prolong their concern.

Quality theory starts that, a good control system will take to increase satisfaction and audit pricing ( De Angelo, 1981 ) . This theory has been used in scrutinizing research that examines the quality of audit performed. This survey will use this theory in the context of examine the consequence of quality non audit service and public presentation of SMEs.

1.8 Organization of Staying Chapters

This survey is presented in five chapters with the first chapter every bit debut every bit good as overview of the survey. Chapter 2 reviews the literatures, which outline old research undertaken in relation to the survey, theoretical frame work and hypotheses development. As for the information variables, Chapter 3 will discourse the sample aggregation and measuring of the variables, informations assemblage every bit good as method of informations analysis. Chapter 4 will discourse the consequences of findings from informations analysis concentrating on statistical analysis, descriptive, arrested development and correlativity analysis. Finally, in Chapter 5 is the decision of the research findings.

Chapter 2


2.0 Introduction

This chapter is a continuance of the old literature reappraisal on non audit service, quality service and public presentation of the company in fiscal and non fiscal. Followed by the account on theoretical model and the hypothesis developed.

2.1 Non-Audit Service

Before the prostrations of Enron and WorldCom issues associating to hearer ‘s proviso of non audit services ( NAS ) have been examined but merely late its given accent in Malaysia. A common statement is whether NAS impairs the hearer independency. The proviso of non-audit services ( NAS ) by hearers to their audit clients has been regarded by regulators in the UK, the US, Australia and assorted other states as a menace to auditor independency ( Craswell, 1999 ) .

Harmonizing to Simunic ( 1984 ) the NAS will heighten the hearers ‘ cognition of their client, taking to a more efficient and effectual audit. Ryan ( 2001 ) argues that curtailing NAS can suppress the hearer ‘s competency and lowers audit quality. Albrecht and Sack ( 2000 ) asserts that restricting NAS will hold an impact in CPA houses ‘ ability to engage and retain extremely qualified persons.

NAS has been a widely researched country particularly the relationship of fees paid to non-audit services and fees paid to scrutinize services, while others examined whether supplying NAS would desert hearer ‘s independency as mentioned earlier and some examined whether the correlativity between the proviso of non audit services and the damage of hearer quality is conditional on hearer specialisation.

Arthur Andersen, being the hearer of the three biggest bankruptcies, Enron, WorldCom and Global Crossing, was to a great extent criticized for the prostrations. Andersen was allegedly emphasizing more on non-audit services ( NAS ) than the audit itself. In the twelvemonth 2000, Andersen earned US $ 25 million in audit fee from Enron and another US $ 27 million from confer withing services ( Kandiah, 2003 ) . In 1998, Andersen ‘s entire world-wide gross from non-audit services was US $ 3,216.8 million as compared to US $ 2,876.6 million merely from audit fees ( Andersen, 1998 ) . Andersen ‘s entire worldwide gross had grown by about 13 % yearly since 1990 ( Andersen, 1998 ) . Andersen cites the growing in their NAS sector as the ground for the addition in gross. This is supported by a survey done by the University of Illinois in the United States ( US ) which found that on norm for every dollar of audit fees, clients paid their independent hearers US $ 2.69 for non-audit audience ( Kandiah, 2003 )

Following the prostrations, scrutinizing profession as a whole has been severely blamed and alterations were being proposed to guarantee that audit houses cut down their over-reliance on NAS ( The Star, 2002 ) . In order to guarantee the independency of hearers and to protect the involvement of investors, the accounting profession in most states has come up with a codification of moralss that spells out guidelines for hearer ‘s competence and independency. In Malaysia, the Malaysian Institute of Accountant ( MIA ) By-Laws ( on Professional Conduct and Ethical motives ) ( revised 2002 ) suggests that audit houses should non accept any assignment if they are besides supplying NAS to a client ; whereby the proviso of NAS would make a important menace to their professional independency, unity and objectiveness.

The SEC in the U.S. has asserted that important non-audit service fees can adversely impact hearer independency and impair hearer decision-making, particularly when those determinations involve a significant sum of professional judgement. Such concerns over hearer independency and the magnitude of NAS performed for audit clients led to the SEC ‘s acceptance of new regulations related to the sums and types of non-audit services supplied by hearers for publically traded companies. These legislative concerns in the U.S. led to the Sarbanes-Oxley Act 2002 which limits the type of NAS hearers ‘ can execute and requires companies to unwrap the sum and type of fees paid to their external audit house and provinces that NAS provided to a client should non be more than 5 % of the entire hearer ‘s wage ; otherwise, the client must obtain pre-approval from its audit commission, as non-audit fees paid in surplus of this per centum would hold the hearer as non being independent. These new limitations and revelations have been introduced in the U.K. with merely elusive differences ( Department of Trade and Industry, 2003 ) . As per Australia and United Kingdom, in Malaysia, Bursa Malaysia ( KLSE ) besides requires all listed companies to unwrap non-audit fees in their one-year studies effectual June 1, 2001. This was empowerment under MIA regulations that became effectual January 15, 2002, professional independency is considered impaired if entire fees originating from proviso of NAS to a client is 20 % or more of the audit house ‘s entire one-year fees received for two or more back-to-back old ages.

Non confidence services is defined as services rendered by the accounting house that do non ensue in the look of an sentiment, negative confidence, a sum-up of findings or other signifier of confidence ( Gill & A ; Cosserat, 1996 ) . Accounting, revenue enhancement digest, direction consulting or consultative services and insolvency and concern recovery are some of the illustrations of NAS. Audited account houses are required to divide the non confidence services provided to the clients and they are non allowed to supply both services to the same client at the same clip. However revenue enhancement services were allowed to be supplying together with the audit service ( Langan, 2003 ) .

In Taiwan the highest proportion for NAS were revenue enhancement services, followed by direction advisory, finance and investing advisory and in conclusion information engineering advisory ( Chien & A ; Chen, 2005 ) . The state of affairs is about the same in Malaysia ( Salleh,2008 ) . Therefore in this survey, services that are taken as benchmark includes revenue enhancement ( Internet Explorer ; revenue enhancement planning, revenue enhancement return ) audience services ( Internet Explorer ; fixing full sets of histories, puting up companies computerized accounting system, better concern public presentation, using for loan, using for fabrication licence, fix client declaration, accounting preparation to clients, fund / assets direction, assets rating, working paper for clients, concern development ) , internal audit ( ie ; internal audit reappraisal, other services ) , secretarial patterns, and other services.

In Australia 67 % of SMEs gets concern advice, runing from fiscal affairs to bettering operational public presentation, from their external comptrollers for illustration in affairs refering corporate finance, concern restructuring, fiscal planning, public presentation reappraisal, benchmarking, hazard direction patterns, information engineering resources and control system. ( Carey, Simnett, and Tanewski, 2005 ) . The latest survey conducted in Malaysia by MIA SME Survey, 2008 indicated that services such as revenue enhancement, accounting, secretarial services and concern consulting are the cardinal services sought after by the SMEs with revenue enhancement service in the top list.

Professional Accountants in Business ( PAIB ) ( 2004 ) conducted a survey in assorted parts of the World ( including Malaysia ) on the function of comptrollers in the concern universe. The findings states a diverseness of functions, embracing endeavor administration, strategic support, internal control, stockholder communications, exchequer, undertaking direction, corporate finance, information engineering, hazard direction, analysis and information direction.

Accountants are used to supply services beyond conformity and audit maps. These services include inheritance/generation transfer/owner transference, concern construction ( company set-up ) , budgeting, pensions, marketing/sales/strategic planning, secretary to company boards, administrative routines/ IT management/organization/ HRM Training and accomplishments development, wage schemes/salary disposal, rating of firms/mergers/demergers ( Doving & A ; Gooderham, 2005 ) . Therefore, the professional comptrollers were encouraged to spread out their scope of services to react to the demands of concerns in supplying advice. Similarly, the comptrollers of Malaysia could reconsider their function in the development of SMEs, at the same time harvesting the wagess of expanded services and part to the state.

2.2 Service Quality

Quality encompasses every facet of the organisation and is really an emotional experience for clients. Most clients want to experience good about their purchase and have the best value for their money. Harmonizing to Johnson ( 1991 ) , clients want to cognize their money has been good exhausted and take pride in their association with a company with high quality image. Harmonizing to, Oakland in his book “ Entire Quality Management ” , ‘quality ‘ merely means run intoing the client demands and this is non restricted to the functional features of the merchandise or service. Quality gives people in different maps of an organisation a common linguistic communication for betterment. It enables all the people, with different abilities and precedences to pass on readily with one another, in chase of a common end.

Merchandise and services are designed with deliberate differences in quality to run into the different wants and demands of single clients. Basically for touchable merchandises the clients look at public presentation, characteristics, dependability, conformity, lastingness, safety, aesthetics, serviceableness and other perceptual experiences ( Garvin, 1984 ) . If the merchandise is intangible, as with services such as non audit service, so specifying and mensurating quality becomes more hard. It is argued that the client defines quality in footings of value to him/her of service received ( Heskett, Sasser & A ; Hart, 1990 )

Many research workers offered assorted definitions of service. Service has been defined as a public presentation that one party can offer to another that is basically intangible and does non ensue in the ownership of anything ( Kotler, 2006 ) but Ramaswamy ( 1996 ) described service as “ the concern minutess that take topographic point between a giver ( service supplier ) and receiving system ( client ) in order to bring forth an result that satisfies the client. The services provided and public presentation of the services frequently varies between service suppliers ( Booms & A ; Bitner, 1981 ) . It is really hard for service supplier to reproduce a service systematically and precisely. Furthermore, services are inseparable since production and ingestion takes topographic point at the same time ( Upah, 1980 )

Lewis and Booms ( 1983 ) defined services quality as step of how good the service degree delivered lucifers client outlooks. Delivering quality service means conforming to clients outlooks on consistent footing. This is farther emphasized by Parasuraman, Zeithaml, and Berry ( 1985 ) , service quality is difficult to specify or step because it is intangible, heterogenous which vary from clients, yearss or manufacturers.

Gronroos ( 1984 ) proposed that there are two types of service quality that is proficient and functional quality. The first conceptual theoretical account of service quality developed by Gronroos ( 1984 ) to increase apprehension of clients service choice perceptual experiences and the factors that influence those perceptual experiences. Based on the model developed by Gronroos ( 1984 ) many comprehensive theoretical account of service quality were created. Parasuraman et Al. ( 1985 ) proposed that service quality is a map of the differences between outlook and public presentation along the quality dimensions. The 10 dimensions that determines service quality harmonizing to Parasuraman et Al. ( 1985 ) are: dependability, reactivity, competency, entree, courtesy, communicating, credibleness, security, understanding/knowing the clients, and tangibles. Therefore, they proposed that the differences between perceived public presentation and expected public presentation of these 10 dimensions determine overall sensed service quality. However these 10 dimensions were grouped into 5 dimensions because the original dimensions are non needfully independent of one another. Assorted statistical analyses revealed correlativity among points stand foring several of the original 10 dimensions. Analysis of informations led to polish of the original theoretical account and confirmed its dependability and cogency. The concluding theoretical account, SERVQUAL had merely five distinguishable dimensions but captured facets of all the 10 original dimensions as follows:

Dependability refers to the ability to execute the promised service dependently and accurately.

Responsiveness reflects the willingness to assist a client and supply prompt service.

Tangible refers to the visual aspect of the physical installations, equipment, forces and communicating stuff.

Assurance refers to knowledge and courtesy of employees and their ability to animate trust and assurance

Empathy refers to caring, individualised attending the house provides its client.

The concluding SERVQUAL instrument consists of 22 points questionnaire split between each of the five dimensions. The instrument has two subdivisions, foremost to mensurate expected quality and the 2nd to mensurate perceived service The steps were recorded on a seven-point Likert graduated table between ‘Strongly Disagree ‘ and ‘Strongly Agree ‘ accompanied each statement in both subdivisions. Based from the past research utilizing SERVQUAL theoretical account in scrutinizing sector, it was found that public listed companies in Malaysia were merely satisfied with touchable dimensions and client trueness partly mediates the relationship between dependability dimensions and client satisfaction ( Haron, Ismail, Ibrahim and Isa, 2006 ) . Therefore once more we are traveling to utilize partial SERVQUAL theoretical account in our survey to analyze the relationship between SMEs perceptual experiences on service quality of NAS and public presentation of SMEs.

2.3 Performance of the Company

Performance is defined as the end products or results in use of resources. They are associated with organisational ultimate results in footings of one-year gross revenues return and growing, profitableness and return on investing harmonizing to Miller ( 1983 ) . There are plentifulness of surveies published about the factors of the success of directors. Harmonizing to Nash ( 1983 ) , fiscal profitableness is one manner to mensurate company public presentation and managerial success. This shows that to successfully accomplish in concern, public presentation really depends on the director ‘s background and the expertness of the director. Definitions of success can be classified by assorted classs. Stuart and Abetti ( 1987 ) defined success into few classs, subjective versus aim, bimodal and multimodal versus uninterrupted and fiscal versus non-financial depending on the context of each survey.

Traditional fiscal steps, linked to the organisation ‘s scheme, are found in Bible, Kerr and Zanini ( 2006 ) research. They include: net income, gross, return on net assets ( ROA ) , return on equity ( ROE ) , portion monetary value, and hard currency flow as a step to fiscal public presentation. While Tamar ( 2002 ) has measured concern public presentation by three variables: gross revenues volume, proprietor income, and figure of employees. Of the three, gross revenues volume appears to be the most efficient step, correlating strongly with all points stand foring capablenesss: accomplishments, resources, planning, and old experience in industry.

This research will be mensurating fiscal public presentation by one-year gross revenues turnover and one-year net income following the research done by Haron, et al. , ( 2001 ) .In order for SMEs to work strategically, Hashim ( 2000 ) recommended that an organisational success can be achieved if director ‘s features or single factors, organisational factors and CSR are being handled decently and aptly. Therefore, top direction or CEOs of SMES who posses the right endowments, accomplishments and abilities, finally will happen their ultimate success or ends. In the context of this survey, company public presentation will be measured by looking at the fiscal and non fiscal public presentation.

This survey is conducted to find whether the NAS obtained by SMEs will act upon the public presentation. Phutut ( 2002 ) used steps of end product and company repute as non-financial.

2.4 Theoretical Model

Based on the literature reappraisal, below is the proposed theoretical model for this survey.

Figure 2-1: Theoretical Framework demoing the dealingss between independent and dependent variables.

The authoritative definition of audit quality that is cited by most audit research workers is that of DeAngelo ( 1981 ) : “ the market-assessed articulation chance that a given hearer will both ( a ) discover a breach in the client ‘s accounting system and ( B ) study the breach. ” The definition high spots two facets of audit quality that many would hold are of import, which are: ( 1 ) the competency of the hearer that determines how likely it is that a misstatement will be detected and ( 2 ) the independence/objectivity of the hearer that determines what the hearer is likely to make about a detected misstatement. The audit quality is influenced by many factors such as the audit house ‘s size, pricing and non-audit services provided by the house ( Wooten, 2003 ) . In order to increase and keep the quality, these factors must be controlled.

The footing of the theoretical model in this research is DeAngelo ‘s ( 1981 ) quality theory being applied on non-audit services. The differences in the theoretical accounts used are the use of non-audit service in this survey alternatively of audit service which was used by DeAngelo ( 1981 ) . The quality service in the model is similar to SERVQUAL theoretical account used in Ismail, Haron, Ibrahim and Mohd. Isa ( 2006 ) which focuses on the visual aspect, knowing, reactivity, dependability, empathy and handiness of the non-audit services.

2.5 Hypothesis Development

Based on the theoretical model, hypothesis was developed utilizing the independent and dependent variable. Chiefly the survey efforts to prove following hypotheses:

H1 The higher the quality service of NAS, the better public presentation of the company in term of fiscal.

H2 The higher the quality service of NAS, the better public presentation of the company in term of non fiscal.

Surveies have shown that SMEs fail due to inability to pull off their fundss, or as a consequence of their aspirations falling trunkss of their capablenesss. Birkett, 2000 and Greenwood, Suddeby & A ; Hinings, ( 2002 ) stated that hired comptrollers maintain a board base of expertness, enabling them to lend to success of concern beyond accounting and auditing services.

2.6 Drumhead

This research chiefly aims to analyze the NAS and the quality of NAS whether it will assist the company ‘s public presentation better in footings of fiscal and non fiscal. This is because most of the old surveies focused on analyzing the NAS with the independent of the hearer and the NAS fees.