MAF 680INTEGRATED CASE

STUDY(A DELIMA)

Prepared By:Norasyikin Binti Sirun

Period:Sept 2014-Jan 2015

Class:AC2208D(KB)

Prepared For:Puan Faizah Binti Hamzah

Were there any abuses of power by the management and breach of fiduciary on the part of the director?

According to Section 132(1) Company Act 1965, a director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office. In this matter the answer is yes, there’s an abuse of power by the management and breach of fiduciary duty of director. A fiduciary is someone who is in control of property in which others have an interest, or is given a power which is exercised on behalf of those who are in a position of dependence. That person owes a duty of loyalty and good faith. As a fiduciary, a director’s duties are:

a) Duty to exercise power in good faith and in the interest of the company In this case, one of the directors of Delima Enterprise is Encik Zayed. He had breach his duty to exercise power in good faith. Encik Zayed engaged the external Auditor Aziz & Co (Chartered Accountant), to perform statutory audit. The Auditor expressed their intention to qualify the Financial Statements due to several unresolved issues. His trying to negotiate with the Auditors to unqualified the report, however, the auditor did not agree. So, Encik Zayed was planned to terminate the auditor’s appointment and appoint a new “friendly party” auditor. According to law, the director should not appoint a new “friendly party” to unqualified the report as Encik Zayed must obey to act in a good faith and bona fide in the interest of Delima Enterprise.

b) Duty to act for the proper purpose When a director misapplies the company’s asset or when he uses the powers he is delegated for the wrong intention, it leads to breach of his duties to the company. From this case, Encik Zayed had withdrawn company money for his personal purpose and do not record the transaction and the amount was charged to the company.

c) Duty to act with reasonable care, skill and diligence Encik Zayed and Puan Hashimah as the director of Delima Enterprise must attend the training for top management. From this situation, both of them were only secondary school background and were not familiar with Accounting Standards and the provision of the Companies Act 1965. They’ve no knowledge about it and need to figure out how to understand it. As a director of the company, they should act with reasonable care, skill and diligence but they did delegate their powers and put trust to their employees by segregate the duties.

Who should be held responsible and accountable?

a) Director Both of director of Delima Enterprise are Encik Zayed and Puan Hashimah should be responsible. They need to plan how to solve the issue regarding the outstanding matter issued by the Auditors. Besides that, gain some or more knowledge to manage their management

system. Encik Zayed must hire more experience and knowledgeable employees to segregate the duties. Plus, two of them to reconstruct their organization business plan such as prepare standard of operating procedure (SOP) to increase the effectiveness and efficiency in the operating system.

b) Account Department Account Department also takes part as this department helps the auditor to complete the audit report. The problem occur when Puan Hashimah who are the director are also the accountant of Delima Enterprise. Many problems’ occur due to wrong transaction, and also missing some of documents. These situations happen because she does not have any knowledge regarding accounting standard. Therefore she will be responsible and accounted for as she’s the person handle account of the company. As a director, she could hire a real accountant that have much better understanding and able to handle account. Puan Hashimah should make a proper filing and all documents must be pre-numbered so that in future it will be easy to find and to refer in future.

c) Human Resource and Administration Manager From the organizational chart, Encik Salam is the Human Resource and Administration Manager. As a manager, he is responsible to prepare the wages in monthly basis including EPF and Socso. Next, it is his duties to prepare the budget to provide training and seminar for staff. It doesn’t make sense that a company didn’t provide training and seminar unless they have lots of working experience. Furthermore, he had to reorganize chart by assign more staffs with qualification and working experience.

d) Operation Manager Puan Balqis responsible to implement Standard of Operating Procedure as she is a Operation Manager. These standard helps employees work more efficiently because they can refer to SOP to perform their tasks.

Could the Audit be completed soon without any qualification?

Yes, everyone needs to give full cooperation and work together with auditor. Management and administration are responsible to provide all the details required by the auditor. From this case, Puan Hashimah who is responsible for account matters need to work harder with Cik Amy to identify human error, identify unrecorded information and organized all files records. If all management, administration and account department take part, it helps to reduce time taken by auditor and the report able to be completed on time without qualification.

What should be done to improve the leadership and management of Delima Enterprise Sdn Bhd?

Encik Zayed should appoint new Chief Executives Officer (CEO) because Encik Zayed cannot be a CEO if he already in position of director. Finance manager should be recruit to guide Cik Amy, a fresh accounting graduate about working procures as the finance manager has more

knowledge and more experience towards finance cost. Project supervisor need to be recruit in order to help Puan Balqis to operate the system in the company with high expertise in order to increase the level of effectiveness and efficiency of the company. With all new recruitment, it can improve the company effectiveness and efficiency and no more problems arise.

Standards Operating Procedure (SOP)

No.

Problem Solutions

1 Account department

- Use the latest accounting software to record all transaction happen in company such as SQL Account, or UBS.

- Hired accountant or new employees with skill that able to take responsibility.

- Account department need to make a limit for certain amount withdraws by company.

- Sales invoice and purchase order should be pre-numbered and proper filing all document.

2 Authorization

- Authorization should be made by Board of Director which is Encik Zayed and Puan Hashimah.

- The authorization should be made by different person for example if company want to withdraw money, it should be sign by account executive and get approval from director.

3 Segregation of duties- The person who is involves in accounting cannot

handle part of record cash.- Time sheet and salary slip should be prepared by

Human Resource and Administration Manager.

4 Organization chart- Encik Salam should reconstruct the organization

chart by hired new employee with working experience such as Project supervisor to supervise existing employee, Finance Executives, Accountant and CEO.