Flat Cargo Berhad Essay

Air onus Industry is a highly war-ridden with low profit margin diligence operated by 85 operators within Malaysia and the Asia peaceful region. compressed Cargo Berhad (FCB) was peerless of them with several(prenominal) subsidiaries associate to this industry. FCB was recognized as one of the biggest air freight companies in Malaysia. With the stentorian of e- job and secured agreements with well-established companies (i.e UPS, Nationwide Expressway, Citylink, Nippon Express etc), the boom of Flat Cargo Berhad was obvious. Even it was expected, FCB would hasten belike remained as the nations wind air cargo carrier if the turn outrage has not appeared. Things develop started to get out of shape for FCB when the external auditor Ken wada & Associates came crosswise several suspicious findings that may educe bilgewater. So we as consultant/advisor throw off noted down the business and came up with the possible solutions in night club to handle much(prenominal) susp icious circumstances. trouble 1The auditors were unable to check the aircrafts called to have been purchased by FCB in 2005. The audit aggroup erect a non-functional rundown aircraft only worth RM231 million in the hangar.FCB claimed to have purchase aircrafts in 2005, but at that place were no documentation frame to back off the claims of FCB that the purchasing ever took place which implied that role player might have took place.As shown on the fleet information above, (Appendix B) there were 2 Boeing 727 and five Mcdonnell Douglas MD-11F (which later was no continuing used for freight purposes) purchased by FCB in 2005 that were in Active status, but when inspected by the audit police squad, found Mior, Asif, Stephanie, Rohannaonly a rundown non-functional aircraft in the hangar which suggested distinction in the claim made by FCB.Solution 1The audit incision could take some measures to verify the claim made by FCB regarding the purchase of the aircrafts by1) Referr ing to the aircraft manufacturers regarding receipts, purchasing documents, invoices , contracts2) Checking any related infixed documents about the aircraft activities like schedules and activities of aircrafts i.e. engineering segment for maintenance of aircraft.3) Verify with the staffs of the union i.e. pi piles, engineers regarding the aircrafts claimed to be purchased4) Checking on leasing companies if there were any business activities from FCB (which would suggest obvious fraud since FCB claimed to have purchase the aircrafts)5) Verify the registration and licensing of the aircraft at the incision of Civil Aviation Malaysia (DCAM)And if this aircraft was real purchased as claimed, the management should encourage these solutions to quash succeeding(a) confusions 1) Update book retention on a regular basis (proceeding on purchases, sales, receipts and payments by an individual or organisation)Problem 2several(prenominal) debitors stay letters were returned because th e addressees had changed their mailing addresses delinquent to this go away it go out have a major impact on accounts callable thus to cash flow. However this entrust control to further problem as follows 1) No exact debtor externalize available for seed2) Possibility of disconsolate debt3) Weak debt help ability by companyMior, Asif, Stephanie, RohannaSolution 2 approximately measures could be taken by auditor to solve this issue by 1) canvass the identity of the debtor or government from reliable sources (Suruhanjaya Syarikat Malaysia (SSM) for organisations, Jabatan Perdaftaran Negara (JPN) for individuals)2) Find supporting documents of debt to pattern out chances of fraud The management team could take these measures to avoid this problem by 1) take a shit an efficient carcass for debt servicing 2) Create a system of affirm theclaim of debtors to make sure fraud does not take place3) Create a database for debtors and keep an updated portfolio on them for early use and reference4) Create a department in the organization that deals solo with debt servicing ( tryd that they have a lot of debtors)Problem 3A larger sum of sales transactions was found with no supporting documents. Most of these transactions involved small clients.This problem will mostly affect the revenue. In addition, it could lead to1) poor book-keeping impact2) manipulation on the revenue routine (RM 550 million)3) manipulation of the shareholders pastime in terms of dividend declared4) rapprochement the closing process for the year of 2005 manually5) complication on debt collection indeed the possibility of spoiled debt in futureSolution 3As farther as we are concerned, the auditor can request the engineering department to provide the document on clients who are employ their courier services and counter-check it with the Custom Department to verify the figure. We assume every performance must be reported to theMior, Asif, Stephanie, Rohanna.DCAM. Therefore, from the rearward process, the auditor would be able to verify the turnover figure.Problem 4A loan received from a Hong Kong base company was found to be wrongly recorded in the debtors accountThis issue will have the major ascertain on liabilities. It has violated the matching principle. The pursual problems can be determined due to these mistakes.1) The impact on liabilities of the FCB will be falloffd whereas assets increase due to the hallucination on double chronicle entry process2) The financial cost (interest expense) will decrease resulting increase ofprofit before tax revenueSolution 4Counter-check and verify the add agreement between the FCB and Hong Kong based company. after verifying, the auditors will correct the double entry according to accounting standard by MASB.Problem 5Several deviant transactions involving the purchase of aircrafts by FCB and offsetting the debtors accounts were found in FCBs books Following antidromic transaction is strictly against the process of accounting system. It violates many principle of accounting system i.e. principle of non-compensation, principles of sincerity and principles of consistency*. brachydactylous transactions could lead to multiplier faults in the financial statement like1) mislead/Understated assetsUsage of cash or credit was not determined arightCutting down the overall debtor amount2) Fail to determine bad debt3) Fail to determine the true figure of debtorsSolution 5Actions that could be taken by auditors1) Reconciliation of book keeping related to purchases of abnormal transactions2) gull proof each and every documents related to purchases and debtor3) If possible ensure debtors confirmation letterActions that could be taken by management1) Not to mix up purchases with debtors2) Debtors can be offset upon receiving cash or against bad debtConclusionIn conclusion, these issues above could be avoided provided that delegation and sequestration of duties were made to ensure accountabil ity in bookkeeping and minimisation to fraud. The company could similarly hire an internal auditor to regularly inspect the financial condition and activities of the company. accountability and counter-checking between one another is too crucial to minimize mistakes and deceit. It is such a shame that a company with such great Mior, Asif, Stephanie, Rohannapotential (to be the leading(a) cargo company in Malaysia) should feature a fate such as this due to trivial avoidable mistakes and fraud. It is best that PLCs to work towards transparency within the company so that mistakes/problems could be detected and solved before it gets out of hand.ReferencesReady Ratios. generally Accepted Accounting Principles (GAAP), Availablehttp//www.readyratios.com/reference/accounting/generally_accepted_accounting_ principles_gaap.html.Last accessed 4th Feb 2014