CASE 1 : A DELIMA (SOURCE: ANSWERS FROM ALL GROUP PRESENTATION AC2208E MARCH-JULY 2012) PROBLEM - TIMESHEET ARE MANUALLY

PREPARED BY EMPLOYEES Employees record their time in & out themselves.) SOLUTION Use punch card Use eyes recognition Use time clock machine @ thumbprint. Supervise time in & out of the employees. Should hire an additional employee who can monitor the attendance and timesheet

-DOCUMENTS ARE NOT PROPERLY PRE-NUMBERED, RECORDED & DOCUMENTED Sales invoice are manually produces & not pre-numbered Monthly statement of account not periodically prepare only prepare & send to customer when payment had been long outstanding.

-Documents (invoice, P.O, D.O etc) should be properly pre-numbered. -Use latest edition of standard financial software (MYOB, UBS, SAP etc) -Periodically prepare & update control accounts.

-LACK OF AUTHORISATION OF BUSINESS TRANSACTION No SOP all decision were made & authorised by either En Zayed or Pn Hashimah. Personal vehicle expenses were charged to company.

LACK OF TRAINING Inadequate job training The companys secretary is in the opinion that Cik Amy is a fresh graduate from a local university with no relevant working experience to handle her job description effectively

All decision should follow SOP. Expenses should be authorised by at least two persons. Personal expense cant be charged as companys expense. Segregation of duties btw persons who approve & stamping the documents. Should be separated to general and specific authorization Cik Amy should be send for further training by the companys top management to further enhanced her understanding in relation to her job description and competency to perform her job. The management should

as a Finance Executive. A simple thing as accounting treatment was unable to be solved by Cik Amy.

enrol her to a short course designated to improve work efficiency and effectiveness in any local institutions such as UiTM, Sunway University and others. It should be properly drawn with distinct functional departments to show distinct job description for each department and several important positions should be added to ensure effective and efficient control. Segregation of duties is important in a companys management as to avoid any task redundancy, fraud, negligence, power abuse, inefficiency and work delay. Moreover, it is to ensure the management works efficiently and effectively. Cik Amy is has been assigned to numerous workloads and some of the works are not within her job description as a Finance Executive. Encik Zayed should segregate Cik Amys workloads to other personnel according to the relevant job descriptions. For example, Account Payables and Receivables should be assigned to different personnel. Under Section 172 (4),(5),(6) CA 1965, only the shareholders can remove the auditor before the expiration of his terms Required the passing of ordinary resolution at general meeting with special notice of 28 days given to the auditor

IMPROPER ORGANIZATION CHART Improper Organisational Chart The organisational chart was improperly drawn and too few positions had been added to the chart. The chart does not include distinct departments to show the organisation by departmental functions. SEGREGATION OF DUTIES Segregation of Duties Encik Zayed does not exercise his duties properly as to segregate management duties equally among the employees of the company that he may thinks fits to perform such duties.

REMOVAL OF AUDITOR Removal of Auditor before the expiration of his terms of office

VISSION AND MISSION The Company only has mission which is a short term goal to achieve Company do not clearly stated their vision as well as the objective of the Company It affects the performance of their employee as they dont know what to achieve LACK OF CONTROL Documents not prenumbered & missing Assets not recorded No supervision

The mission, vission and objective of the Company must be clearly stated It must be informed to employees so that they know the Companys goal

Documents serially numbered & kept properly Assets properly recorded & kept in a locked room Supervision done in regular and continuing basis All recorded documents should be marked posted Management should review the adequacy of internal control on regular basis Use to plan on the cost that will be incurred To compare the budget cost and actual cost to see any variance To help manager to make efficient decision making All types of incorporated companies Enhance corporate governance Matters regarding powers of the: registrar of the company management and administration of the company Officers of the company Accounting and auditing of the company General rules Appoint an auditor at each Annual General Meeting (sec 172(1))

NO BUDGET PLANNING No budget planning was prepared

DIRECTORS DUTIES Directors do not understand about the Companies Act 1965

APPOINTMENT OF AUDITOR Directors simply appoint auditor without any proper procedure

 The auditor appointed holds office until the conclusion of the next AGM CORPORATE GOVERNANCE Cik Amy do not have enough knowledge and experience in her field of work. Company should provide guidance and training to new employees. Management should hire someone that is capable in doing his work.

NO STANDARD OPERATING PROCEDURE (SOP) Withdrawal of companys money made without proper documentation. Decision and authorization made by the directors on its own without proper documentation It will increase the risk of fraud and inconsistency in performing task Give the auditor hard time to keep track of the transaction and movement of asset.

Delima should implement standard operating procedure (SOP) : Increase efficiency and consistence in performing task Indicate compliance in the entity requirements and can be used to train others

LACK OF COMPETENCY Head of department leaded by unqualified staff Does not spend on training of staff Decrease company performance as a whole Discredit the company reputation 5 CS CREDITWORTHINESS Employees manually prepared their timesheets. No staff in charge and monitor employee attendance. Staff take advantage over the slackness Decrease in company performance

Spend more on training to equip employee with proper knowledge Should hire qualified staff that have experience

Install automated time attendance

The 5 key elements a borrower

should have in order to obtain credit : 1. Character Integrity / a borrowers reputation 2. Capacity companys borrowing history 3. Capital Net worth 4. Collateral Assets to secure the debt 5. Conditions Of the borrower and the overall economy Eg. interest rate and amount of principal RECORDING Several assets purchased by the company were not recorded LEAN ORGANIZATION Lean organization with basic functional position ACADEMIC QUALIFICATION Did not meet academic qualification or relevant experience that required by the company STATUTORY AUDIT Company did not perform the Statutory Audit Every asset purchased must be recorded manually and computerized. Assign person(s) to be responsible for the company assets. Create an Asset Management Division. Propose the Asset Tagging System. Position & function should be clarified clearly. Hire people that have good academic qualifications & relevant experiences.

AUDITORS DUTIES AND RESPONSIBILITIES Encik Zayed tried to negotiate auditor to make unqualify report

Only legal to Public Listed Company. Not compulsory for Private Company to perform S.A Private Companies may need to do so when applying for loans and etc from Financial Institutions. Sec 174(2) Express opinion in report (duty to report defects, irregularities in account) Sec 174(3) Report particulars of deficiency, failure and

PROBLEM IN FINANCE DIVISION Invoice not pre-numbered Company did not send Statement of Account(SOA) to client Not prepare monthly reconciliation Use companys money for personal use No segregation of duties ACCOUNTING SYSTEM MYOB Software not integrated PROBLEM IN HUMAN RESOURCE DIVISION Pay wages weekly without employees benefit Unqualified staff (lack of knowledge and experience) Lack of employees and unbalance staff allocation Were there any abuses of power by management and breach of fiduciary on the part of the directors? Who should be held responsible and accountable? Could the Audit be completed soon without any qualification?

shortcoming Appoint new finance manager to authorize and supervise finance department Separate duties according to work position Emphasize the separate legal entity concept

Purchase new software Eg: UBS, SAP Software, Ramcon Engineering, Autocount,etc Pay wages in monthly basis including EPF and Socso Provide training and seminar for staff Assign more staffs with qualification And re-organise chart YES

NOT ONLY DIRECTOR, ALL MANAGEMENT LEVEL SHOULD BE RESPONSIBLE AND ACCOUNTABLE Yes, the audit report can be classified as qualified opinion report due to several unresolved issues. If the auditor audited the rest of the financial statements and is reasonably sure that they confirm with Generally Accepted Accounting Priciples (GAAP), then the auditor simply states that the financial statements are fairly presented, with the exception of the issues which could not be audited.

What should be done to improve the

SUME JAWAPAN DIATAS

leadership and management of Delima Enterprise Sdn Bhd?