TITLE: DELIMA CASE

GROUP: AC10
GROUP MEMBERS:
NAME ID

NUR SYUHADA BINTI YUSOF 62213217120

WAN NURLAILI ASYIQIN BINTI MEOR MUHD ROSLAN 62213217067

ZU IZRINA FITRI BINTI ZULKEFLI 62213217020

NOMAN AHMED ANWAR SAEED 62213217206

MUHAMMAD ARIF BIN AHMED AZMAN 62213117302

1. From the legal perspective by referring to the Companies Act 2016 under Duties of
Directors, there is abuse of power by the management and breach of fiduciary in part
of directors.
This can be seen when Encik Zayed and Puan Hashimah planned to
terminate the auditor appointment from Aziz & Co who expressed their intention to
qualify the Financial Statement and hire a new “friendly party” auditor. In addition to
that, the auditors found out that personal vehicle expenses for Encik Zayed and Puan
Hashimah were charged to the company during the year 2005. According to
Companies Act 2016, every director of the company is under fiduciary duty to
exercise their powers for a proper purpose and in good faith in the best interest of the
company. This shows that the directors went against the act by not using the powers
for proper purpose and in good faith by having intentions to commit fraud and not for
the interest of the company.
Encik Zayed and Puan Hashimah were not familiar with Accounting
Standards and the provision of the Companies Act 1965 including their roles and
duties as company directors. By thus, this violates the law where as a director must
also exercise reasonable care, skill and diligence with the knowledge, skill and
experience written in the Companies Act 2016 under duties of director.
Next in the auditors findings, several withdrawals from the company totaling
RM12,500 were made from the company without proper documentation. The
Companies Act 2016 said that directors of companies are responsible to ensure that
the accounts of the company are sufficiently kept and that the transaction and
financial position of the company can be adequately explained and disclosed for
auditing. This shows that they are breaching the law by not disclosing the transaction
as they did not have a proper documentation.
2. The directors, top management and employees of Delima Enterprise should be held
responsible and accountable. This is because they are more familiar with their roles
and duties as company director. They should have enough ability and expertise to
build up a decent technique and structure in the organization. The top management
on the other hand should have involved in giving opinions on decision making. They
are the ones who discuss with the directors on any issues and are significant for the
future of the company. The finance executive, Cik Amy ought to recommend the best
possible documentation for any data and information that is related to the accounting
transaction in the company as well as to keep up proper recording of the company’s
assets and incorporate an accounting system to be utilized in the organization.

3. Yes, if everybody in the organization give full cooperation and working together with
auditor, audit teams which means that for example, management and administration
are need to provide all the details required by the auditor. Then, the audit processes
can be completed without any qualification. 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 departments take part, it helps to reduce
time taken by the auditor and the report is able to be completed on time without
qualification. According to financial perspective the DESB have a tons of weaknesses
about their accounting and finance. Hence the weaknesses and recommendation
are:

No. Weakness Recommendation

1. There are no Standard Operating DESB should consider making

Procedure (SOP) inside this company the standard operating
when preparing the accounting since all procedure (SOP) inside this
decisions were made and authorised only organization to help all the
by directors. workers to carry out their
routine operation accordingly.

2. There are no reconciliation performed for Since there are no

account payables, account receivables, reconciliation during 2004 and
cash book and bank balances. year 2005, DESB should put
the amount inside the profit
and loss account

3. The company have an over paid their The overpayment made by the
creditor in 2004 for RM 50,000 directors can be fix if they
advice the creditors and
 request for credit notes.

4. There are unrecorded cash and bank The DESB can reconciled the
balances in the cash book that have made RM 70,000 or written of inside
the cash book overstated by RM 70,000 profit & loss account.
compared to the bank statement.

4. i. The first thing that should be changed in the company to minimize the abuse of
power is that Encik Zayed should appoint a new CEO since he is appointed as a
director.
ii. The company should appoint a new finance manager who has proper experience
and knowledge in the field to train Cik Amy who is a young Accounting graduate.
iii. The company should recruit a qualified operation manager, and project supervisor
in order to increase the company operations efficiency and effectiveness.
iv. The company should establish Standard Operating Procedure to allocate the
company resources efficiently. The company should mitigate the following
weaknesses:

No. Weaknesses Recommendations

1- No Segregation of
duties - The person who holds asset custody cannot maintain
the records keeping of the general ledger.

- The timesheets(Time cards) must be prepared by the

Human Resource department.

2- No proper
Authorization - Authorization must be granted before making any
major decision from the board of directors.

- Authorization cycle must be established to authorize

daily operations by the head of departments. For instance,
cash payments made to suppliers should be authorized by
the account payable and cash disbursement department.

- Authorization on company withdrawals must be

granted from directors and finance executives to prevent
any unrecorded withdrawals.

3- No use of pre-
- The company should establish documents pre-
 numbered
documentation numbering to ease the process of locating or referring to
any distorted or missing data.

4- Lacking accounts
integration - The company should acquire a developed accounting
system to facilitate accounts integration and prevent human
error during complying data at the end of each period.

Inexperienced
5- accounting - The accounting department should hire new qualified
personnel employees to prevent any accounting malpractice such as
unrecorded transactions, and wrongly classified
transactions.

No monthly
6- customer statement - The company should send monthly statements to their
customers to expedite the cash collection process.

No regular account
7- reconciliations - The company should conduct monthly account
reconciliations to prevent any over/under-statement of
account balances.