ACC 4291 Integrated Case Studies DELIMA ENTERPRISE SDN. BHD. 1. 0CHARACTER: 1. Encik Zayed- Principal shareholders- Managing Director 2. Puan Hashimah- Principal shareholders-Chief Operating Officer 3. Puan Balqis- Operations Manager 4. Encik Salam- Human Resource and Administration Manager 5. Cik Amy- Finance Executive (from May 2006)-no working experience 6. External Auditor- Auditor Aziz & Co- to perform statuary audit (2003-2006) 2. 0OVERVIEW OF THE PROBLEMS: ? May 2006-they secured contract worth RM 750,000 to be implemented over 6 months. Due to shortage of funds, they applied loan from banks.
The banks required Audited financial statement for the last 2 years, but they do not have any.
? July 2006-1st audit experience ? Auditors want to qualify audit because due to several unresolved issues. ? He wants to terminate the auditors’ appointment and hire a ‘new friendly party’ auditor. ? They are not familiar with FRS n companies act ? Employed family members who are not qualified 3. 0BACKGROUND OF THE COMPANY ? Founded in 1981. ? Activities: • Conducted trading and supplying related products and man powers to the oil and gas industries. Provision of engineering services.
? Mission: to become a leading service contractor and provide quality products and excellent services. ? Revenue: 2004-RM 1 million, 2005-RM 1. 7 million 4. 0ACCOUNTING SYSTEMS, INFORMATION AND RECORDS ? Types of accounts: • Procurement • HR-pay workers in cash on a weekly basis • Accounts payable (AP) • Accounts Receivables (AR) ? Collection via cheques and cash • Cash Book (CB) • General Ledger(GL) • Purchase Order (PO)-manually prepared and not re-numbered • Trade Creditors (TC) • Trade Debtors (TR) 5. AUDIT FINDINGS AND RECOMMENDATIONS ? The Auditor had difficulties to complete the audit because: • Incomplete information and records • SOP is not in place • Records are not organized and field accordingly: ? Several assets purchased by the company were not recorded ? Several overpayment made to Trade Creditors ? Several collection from Trade Debtors were long outstanding ? Several personal withdrawals and expenses were charged to the company ? Several unrecorded cash withdrawals and Cash/banks balances were not reconciled ? The Auditors noted several findings: |No.
Findings |Recommendations |Cik Amy’s analysis | |1. |No SOP & all decisions made by En Zayed or Pn |Prepare SOP and implemented | | | |Hashimah | | | |2. |No reconciliation was performed for AP, AR, |The amount be provided in the P&L Accounts |AP: | | |Cash Book and Balances. |RM 150 00 (2004) was actually Cash | | |2004-RM 150 000 , | |Advance | | |2005-RM 250 000 | |AR: | | | | |Balance was not a continuous list and | | | | |several went missing | |3. |Overpayments to Trade Creditors. Advise respective Trade Creditors and request |Was due to human error as a result of | | |2004: RM 50 000 |for Credit Notes |lack of control | |4. |Cash & Bank balances were overstated. |The amount to be reconciled or written off to |Recorded RM 70 000 twice in the GL. | | |2004-RM 40 000 |P&L accounts |RM 40 000 (TRA-2005) | | |2005-RM 30 000 | |RM 30 000 (Cash Adv. 2004) | |5. AR in 2004 understated by RM 40 000 | |EPF for workers were not deducted and | | | | |remitted to EPF | |6. |No individual project budget & analysis were | |There were no comprehensive business | | |prepared. | |plan and budget prepared. | | | | |En Zayed do not want to invest on | | | | |training for employees | |7. Personal vehicle expenses charged to company | | | | |in 2005: RM 50 150 | | | |8. |Withdrawals totaling RM 12 500 without proper | | | | |documentation | | | QUESTIONS: 1. Were there any abuses of power by the management and breach of fiduciary on the part of directors? 2. Who should be held responsible and accountable? 3. Could the audit be completed soon without any qualification? 4. What should be done to improve the leadership and management of Delima Enterprise Sdn. Bhd. ?
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