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QUESTION 1: Were there any abuses of power by management and breach of fiduciary on part of directors?

Directors should not make any profit out of the position as the director . Exercise powers honestly and bona fide for the benefit of the company 2. Not to place himself/herself in a position where there is a conflict between his/her duty to the company and his personal interest or duties of shares 3.Fiduciary Duties of Director 1.

• Most of the powers of directors are powers in trust .therefore should be exercised in the interest of the company. . not in the interest of the directors or any section of members.Breach of fiduciary duty: • Director acts dishonestly to the interest of the company.

there are abuses of power by management and breach of fiduciary on part of directors. • There is a conflict between Encik Zayed’s duty to the company and his personal interest. 2. . failing which Encik Zayed planned to terminate the auditor’s appointment and appoint new “friendly party” auditor to negotiate. Personal vehicle expenses for Encik Zayed and Puan Hashimah totalling RM50.150 charged to the company during 2005. Tried to negotiate with the Auditor to not qualify the Financial Statements. 1.ANSWER • Yes.

.QUESTION 2: Who should be held responsible and accountable.

Directors .Encik Zayed and Puan Hashimah Directors of the company. mission and policies  2. Set strategy and structure 3. Delegate authority to management . play the most important role in the company. Main role : vision. head of the organization. Establish  1.

.Together with the directors in setting objectives and decision making of the company Main responsibility is the effective operation of the company. Responsible for the management and day-today operations of the corporation.

Puan Hashimah (Prior to Cik Amy’s appointment ) • Ensure proper documentation of any information and data related to transactions • Maintain proper records on assets of the company • Supervise in accounting process regularly .Person in charge of finance .

for keeping proper registers and accounting records . efficiency. and administrative effectiveness Have clear understanding of the aims and objectives of the company. and of the powers and restrictions as provided in the Memorandum and Articles of Association of the company Disclose to the board of directors or an appropriate public officer any information within his knowledge that he honestly believe suggests that a fraud is being or is likely to be practised by the company or by any of its directors or employees Assist and advise the directors to ensure at all times that the company maintains an effective system of internal control.Code of Ethics for Company Secretary – CCM At all times strive to assist the company towards proper objectives within the rule of moral responsibility.

• Employees below the officer level will have job titles and descriptions designed to meet the corporate goals as set by the directors. but all the top management. the officers should also support and give opinion in every decisions taken by directors.ANSWER 2 • Not only Encik Zayed and Puan Hashimah as the directors. • Company Secretary at all times should to assist the company towards proper objectives . • Although Encik Zayed and Puan Hashimah are the directors of the company. employees. and the Company Secretary of the company should be responsible and accountable as well.

QUESTION 3: a) Could the audit be completed soon without any qualification? From financial perspective. b) . What are the most appropriate solution to DESB financial management and operations.

• Audit can only be completed but the auditor still need to qualify the financial statement. audit cannot be completed without any qualification.Could the audit be completed soon without any qualification? • No. • EPF contribution was not provided by the company to the employees which is breach of accounting standard FRS119 Employee Benefit. . • Reason – There are several issues that cannot be solved such as: • Several pages of account receivable listing were missing at the situation where the sum RM250.000 of account receivable were wrongly entered into another account.

e. Breach of FRS119 Employee Benefits – EPF is not provided for employees of DESB. Several pages of account receivable listing were missing . the rest of the financial statements were audited and they conform GAAP. •2 Types of Situation: •Single deviation from GAAP – this type of qualification occurs when one or more areas of the financial statements do not conform with GAAP.000 . and although they could not be verified.g.Qualified Audit Report • issued when the auditor encountered one of two types of situations which do not comply with generally accepted accounting principles. •Limitation of scope – this type of qualification occurs when the auditor could not audit one or more areas of the financial statements. however the rest of the financial statements are fairly presented.g. e. but do not affect the rest of the financial statements from being fairly presented when taken as a whole.auditor not being able to observe and test on the amount RM250.

s Loan Application • • Tendency of bank to reject the loan is high.Qualified Audit Report v. Other information: – Credit history – Performance history – Assets of the company (Collateral) – Guarantee. (The bank will normally require the directors to personally guarantee the loan) – Cash Projection Statement – Financial forecast – Presentation to the bank • • . – Character  Integrity / a borrower’s reputation – Capacity  company’s borrowing history – Capital  Net worth – Collateral  Assets to secure the debt – Conditions  Of the borrower and the overall economy Audited Financial Statement is not the only source of information used by bank. 5C’s Creditworthiness concept always being practicing by bank.

• Private loan guaranteed • Loan from family • Loan from other peer-company/financial institution other than bank .secured loan • Equipment leasing – sell the asset and lease back for company uses.Other Sources of Financial Support • Collateral . • Asset-based loan – use inventory or receivable to get financial support.

maturity period of the loan.Other solution.. interest rate. . • Negotiate with the contractor – payment made periodically • Negotiate with the bank to change the loan size.

.QUESTION 4: What should be done to improve leadership and management of DESB? Restructure the organization and draft the applicable Standard Operating Procedures (SOP) for the company to operate effectively.

Impact – Time consuming . •Several pages of the Account Receivables listing is missing. Impact and Improvement PROBLEM AND IMPACT 1 Improper documentation and transaction records • Sales’ invoice and purchase order are prepared manually and not pre numbered •The “MYOB” programmed was not integrated. .Fraud IMPROVEMENT • Documents should be properly prenumbered • Update to the latest accounting software (MYOB) • Ensure documents be kept properly.Problems Arise.

Impact and Improvement 2 Manual records on employees’ attendance •The employees prepare their own attendance without any supervision. Impact – Fraud .Work inefficiency 3 No Standard Operating Procedure (SOP) • All decisions are authorised by En Zayed • Each department should implement and Pn Hashimah SOP.Problems Arise. • Appoint supervisor to monitor employees attendance.Give difficulty in preparing financial statement . decision making and documenting. • should be reviewed by the authorities at every month. • Withdrawals are made from the co without proper documentation Impact – Misuse of power . • No reconciliation was performed for • Ensure compliance to SOP in every each accounts.

Problems •Pay salaries in monthly basis including EPF and SOCSO • Provide training for existing employees •Should hire qualified employees • Implement SOP during employees’ recruitment .Difficult to last long in this business . Impact and Improvement 4 Directors do not familiar with their roles and duties • En Zayed and Pn Hashimah tried to negotiate with auditor to not qualify the Financial Statements. .Give bad reputation.incompetence 5 Problem in Human Resource department • The EPF contribution is not deducted and remitted to EPF • Hire unqualified and inexperience employees.Employees unable to perform their work well due to lack of knowledge. Impact . •Director should refer to Company Secretary for every decision making •Director should update their knowledge . Impact .

Impact and Improvement 6 No vision and objectives •The company only has mission •Must state clearly the vision and objectives of the company.The employees has no direction in performing their work .Problems Arise. • Should inform the vision and objectives to the employees so that they are clear with the job they perform. Impact – Difficult to achieve the goal/target .

Standard Operating Procedures (SOP) .

Salam Finance Manager Puan Hasimah Accounting Officer Vacant Operation and Marketing Manager Puan Balqis Admin Assistant Vacant Account Supervisor Cik Amy Expenses Accountant Vacant Account Payable and Receivable Accountant Vacant Project Supervisor Vacant Revenue Accountant Vacant Project Team Contract basis .Propose Organizational Chart CEO En.Zayed Company Secretary Human Resources & Administration Manager En.