MAF 680
INTEGRATED 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, theres 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 directors 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 auditors 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 companys 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Zayed had withdrawn company money for his personal purpose and do not record the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.
Theyve 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 shes 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
doesnt make sense that a company didnt 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
-
Account department
Authorization
-
Segregation of duties
Organization chart
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 prenumbered and proper filing all document.
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.
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.
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.
