Flat Cargo Berhad Essay Sample

  • Pages: 3
  • Word count: 592
  • Rewriting Possibility: 99% (excellent)
  • Category: audit

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Introduction of TOPIC

Flat Cargo Berhad (FCB); a high reputable company, was one of the largest air freight companies in Malaysia. It was a listed company and registered as investment holding company. The main activity of the company was as an air cargo carrier, provide air freight transportation which includes aircraft charter and leasing. FCB also has several subsidiaries and the principal activities of its subsidiaries included air freight services and aircraft ground handling services. FCB started its operation in 1997 and on September 2001, the Company was listed in Bursa Malaysia. The largest share of the company owned by Miri Group amounted 55.2 million shares, which brought from the founders via an off market deal. In 2005, FCB was ranked 4th in term of capital gain and dividend to shareholders. The share price had roses from RM 1.89 in 2001 to RM 10.60 per share in 2005. With the wide range of customer worldwide, the Company can maintain it financial operation in five consecutive years. The protagonist or decision-maker in this case is Mr Chuah Mun Soong, auditor from Kencana & Associates which responsible to make a financial audit for Flat Cargo Berhad (FCB).

In 2006, while prepare audit work for Flat Cargo Berhad, the auditors discover several suspicious result which lead to delay a decision in finalizing the audit

or’s report. Mr Chuah had been informed by his subordinates that there had been inconsistencies in

the accounts of Flat Cargo Berhad. Mr Chuah needs to gain more information from the company in order to inform his boss, Mr Keong Chee Wah about the situation occur in the client’s company. Mr Chuah was in dilemma because he wants to keep good the relationship between Kencana & Associates with Flat Cargo Berhad but at the same time, in order to inform his boss about the situation, he needs to get further information
about the fraud that is possibility occur in the company. Other than that, Mr Chuah has a time constraint as he need to report to his boss within two weeks while to gather the information he need to go through the company’s profile and it time constraint. The major issue found in this case is possibility of fraud in financial performance of FCB.

The auditor found inconsistencies in the account of FCB which is material to the company. From the audit working paper, among the problems faced in the company is there were no supported documents for the purchase of aircrafts as well as documents for large amount of sales which is very important in order to verify the transactions to be true or fake. Another problem is related to the debtors’ transaction, whether there is weak debt servicing ability and debtors’ transactions were recorded wrongly. All of these problems may be suspected as abnormal or suspicious transactions occurred in the company and may lead to fraud. From the exhibits, it can be seen that there is several suspicious result in FCB’s financial statement. Even though the sales had increased in the year 2005, the increase can be considered as too much and without supporting documents, it caused auditor to be suspicious. Year 2005 also showed incidental increase in the operating expenses. Moreover, the amount of assets also is increasing all of a sudden in the year 2005. It can be seen that FCB intend to show they have many assets and less amount of liabilities. This is proven in the amount of loan itself when auditor found that loan is wrongly recorded in debtor’s account.

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