report a delima

Topics: Auditing, Financial audit, Management Pages: 7 (1991 words) Published: November 20, 2013

Company background
Founded in 1981, by Encik Zayed that conducted trading and supplying related products including manpower supplies to the oil and gas industries. In 2004, the enterprise was incorporated as Delima Enterprise Sdn. Bhd. Two principle shareholders and controlling directors were Encik Zayed and Puan Hashimah who are husband and wife. They also hired their family members to work in the company that are Puan Balqis and Encik Salam as Operation manager , Human resources and Administration manager respectively. Below are the organization chart of A Delima Enterprise Sdn Bhd :


Summary of the case :
This case is about Delima Enterprise which wants to make banking facilities from Malayan Banking Berhad and CIMB Bank Berhad. The banks required company’s Audited Financial Statements for the last two years. From the requirement, Encik Zayed and Puan Hashimah realised that the company did not performed any statutory audit before. So, they engaged with the external Auditor Aziz & Co. (Chartered Accountant). The auditor need to performed statutory audit for the period 2003 to 2006.

To resolve several issues, the auditors need to qualify the Financial Statements. But, Encik Zayed and Puan Hashimah tried to negotiate with the auditor to not qualify the Financial Statements. The auditor was not agreeing with the Encik Zayed negotiation and he planned to terminate the auditor appointment. Encik Zayed also want to appoint new “friendly party” auditor to make the audit reports. The company also have appointed Cik Amy to analyse and provide the auditors with necessary clarification and documentation. Cik Amy was a young accounting graduate from local university. She has no working experience to do the job.

Besides they do not familiar with audit, they also did not familiar with Accounting Standards and the provisions of the Companies Act 1965, including their roles as Company Directors. This company also a family based company. The organization of the company was owned by Encik Zayed family. The company also consist from inexperienced staff of their job.  

Based on the case we can conclude that there are several issue arises. That are ethical issue, accounting information issue, legislation issue, and also issue from the view of corporate governance.

Ethical issue
Ethic is define as the moral principles that govern a person’s or group’s behaviour and also the moral correctness of specified conduct. So based on this case we can see that the director of A Delima Ent. Sdn Bhd had breach the ethic Code of Business Conduct and Ethics through the issues below.

1) Ethical issue 1
The Directors tried to negotiate with the auditor, Aziz & Co to not qualify the financial statements for the statutory audit. Under the Code of Business Conduct and Ethics, it stated that, “Each director is expected to deal fairly with the respective company’s customers, suppliers, competitors, officers, and employees. None should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair dealing practice” Recommendations

The Directors Encik Zayed and Puan Hashimah should practice and show more integrity and comply with the laws as they have a duty of being due care and duty to act honest as the directors in the company. 2) Ethical issue 2

Encik Zayed and Puan Hashimah are the principle shareholders and directors. They also hired their own family members, Puan Balqis and Encik Salam as Operations Manager and Human Resources and Administration Manager respectively. Under Code of Business Conduct and Ethics for Directors stated that, “Directors should not engage in any conduct or activities that are inconsistent with the company's best interests or that disrupt or impair the company's relationship with any person or entity with which the company has or proposes to enter into a...

References: Governance - What is Governance.html
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