Flat Cargo Berhad Essay

Air Cargo Industry is a highly belligerent with low profit margin industry operated by 85 operators deep down Malaysia and the Asia Pacific region. Flat Cargo Berhad (FCB) was one of them with several subsidiaries related to this industry. FCB was recognized as one of the biggest air freight companies in Malaysia. With the flourishing of e-business and secured agreements with well-established companies (i.e UPS, countrywide Expressway, Citylink, Nippon Express etc), the boom of Flat Cargo Berhad was clear. Even it was expected, FCB would have plausibly remained as the nations leading air cargo be atomic number 18r if the scandal has not appeared. Things have started to get out of shape for FCB when the foreign auditor Kencana & Associates came across several shadowed findings that may suggest burlesque. So we as consultant/advisor have noted down the paradox and came up with the possible solutions in order to handle such suspicious circumstances.occupation 1The auditors wer e unable to master the aircrafts claimed to have been purchased by FCB in 2005. The audit team set in motion a non-functional rundown aircraft barely deserving RM231 million in the repair shed.FCB claimed to have purchase aircrafts in 2005, but in that location were no enrolmentation free-base to support the claims of FCB that the purchasing ever took power which implied that fraud might have took place.As shown on the fleet learning above, (Appendix B) there were two Boeing 727 and five Mcdonnell Douglas MD-11F (which later was no longer apply for freight purposes) purchased by FCB in 2005 that were in Active status, but when inspected by the audit team, found Mior, Asif, Stephanie, Rohannaonly a rundown non-functional aircraft in the hangar which suggested inconsistency in the claim do by FCB.Solution 1The audit department could take some measures to verify the claim made by FCB regarding the purchase of the aircrafts by1) Referring to the aircraft manufacturers regardi ng receipts, purchasing documents, invoices , contracts2) Checking any related informal documents about the aircraft activities like schedules and activities of aircrafts i.e. engineering department for maintenance of aircraft.3) Verify with the staffs of the beau monde i.e. pilots, 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 segment of Civil Aviation Malaysia (DCAM)And if this aircraft was actually purchased as claimed, the management should encourage these solutions to repress future confusions 1) Update bookkeeping regularly (transactions on purchases, sales, receipts and payments by an individual or organisation) fuss 2Several debtors confirmation earn were returned because the addressees had changed their mailing addressesDue to this p assing it get out have a major(ip) impact on accounts receivable thus to cash flow. However this will lead to further problem as follows 1) No exact debtor figure available for reference2) Possibility of bad debt3) Weak debt operate ability by communityMior, Asif, Stephanie, RohannaSolution 2Some measures could be taken by auditor to solve this issue by 1) check up on the identity of the debtor or organization from reliable sources (Suruhanjaya Syarikat Malaysia (SSM) for organisations, Jabatan Perdaftaran Negara (JPN) for individuals)2) Find support documents of debt to rule out chances of fraud The management team could take these measures to vacate this problem by 1) fashion an efficient system for debt servicing 2) Create a system of verifying theclaim of debtors to make sure fraud does not take place3) Create a database for debtors and keep an updated portfolio on them for future use and reference4) Create a department in the organization that deals solely with debt serv icing (provided that they have a lot of debtors) problem 3A large 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 crop2) manipulation on the revenue figure (RM 550 million)3) manipulation of the shareholders interest in terms of dividend declared4) balancing the closing parade for the year of 2005 manually5) complication on debt collection therefore the possibility of bad debt in futureSolution 3As far as we are concerned, the auditor can request the engineering department to provide the document on clients who are using their courier services and counter-check it with the Custom department to verify the figure. We assume every activity must be inform to theMior, Asif, Stephanie, Rohanna.DCAM. Therefore, from the backward process, the auditor would be able to verify the turnover figure.Problem 4A loan received from a H ong Kong based companion was found to be in limitly recorded in the debtors accountThis issue will have the major influence on liabilities. It has violated the unified principle. The following problems can be mouldd due to these mistakes.1) The impact on liabilities of the FCB will be descendd whereas assets increase due to the error on double entry process2) The fiscal cost (interest expense) will decrease resulting increase ofprofit before taxSolution 4Counter-check and verify the Loan 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 abnormal transactions involving the purchase of aircrafts by FCB and offsetting the debtors accounts were found in FCBs books Following abnormal 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 pri nciples of consistency*. Abnormal transactions could lead to multiplier faults in the financial statement like1) Overstated/Understated assetsUsage of cash or credit was not determined properlyCutting down the boilers suit 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) incubate proof each and every documents related to purchases and debtor3) If possible match debtors confirmation letterActions that could be taken by management1) not to mix up purchases with debtors2) Debtors can be offset upon receiving money or against bad debtConclusionIn conclusion, these issues above could be avoided provided that delegation and segregation of duties were made to ensure accountability in bookkeeping and minimisation to fraud. The company could also hire an internal auditor to regularly inspect the financial condition and activities of the company. Accountability and counter-checking between one another is also life-or-death to minimize mistakes and deceit. It is such a shame that a company with such great Mior, Asif, Stephanie, Rohannapotential (to be the leading cargo company in Malaysia) should suffer a fate such as this due to small 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. broadly speaking Accepted Accounting Principles (GAAP), Availablehttp//www.readyratios.com/reference/accounting/generally_accepted_accounting_ principles_gaap.html.Last accessed fourth Feb 2014