Johnson Turnaround
QUESTION 1
Refer to the case on “Johnson Turnaround” in Appendix A.
The newly appointed CEO of Johnson Pte Ltd., Encik Azmi, is tasked with the design and implementation of a turnaround strategy for the company. An effective turnaround strategy consists of assisting the company to identify, develop and implement initiatives that increase profits and market share, or position the firm to raise needed capital. The objective of the turnaround initiative is to focus on areas of business risk and generate successful results.
Required:
Assume that you are part of the management team which Encik Azmi has assembled to assist him in formulating the turnaround strategy. By focusing on key functional areas of the business, identify the various initiatives that can be undertaken and incorporated by Encik Azmi into his turnaround strategy for Johnson Pte Ltd.
QUESTION 2
Refer to the case on Smart Entertainment Videos Bhd (SEV) in Appendix B.
Required:
(a) What warning signs do you see of possible fraudulent financial reporting at SEV?
(b) What factors should SEV’s external audit firm consider during its audit of the financial statements, in light of the above warning signs?
(c) What types of earnings manipulation schemes might these warning signs indicate? Provide examples.
Appendix A: Johnson Turnaround
Introduction
Azmi had just joined Johnson Pte Ltd. (JPL), a public non-listed subsidiary of a fast moving consumer goods (FMCG) Hong Kong-based group of companies, as its chief executive officer in November 2009. He had been handpicked by the Chairman to purposely plan and execute an appropriate turnaround strategy. He’s now reviewing the financial statements and looking at the various options available.
General Company Background
JPL is located in the southern Indian region and was wholly-owned by the Indian government. Twenty years after began operations, the Hong Kong group of companies acquired 80%
Refer to the case on “Johnson Turnaround” in Appendix A.
The newly appointed CEO of Johnson Pte Ltd., Encik Azmi, is tasked with the design and implementation of a turnaround strategy for the company. An effective turnaround strategy consists of assisting the company to identify, develop and implement initiatives that increase profits and market share, or position the firm to raise needed capital. The objective of the turnaround initiative is to focus on areas of business risk and generate successful results.
Required:
Assume that you are part of the management team which Encik Azmi has assembled to assist him in formulating the turnaround strategy. By focusing on key functional areas of the business, identify the various initiatives that can be undertaken and incorporated by Encik Azmi into his turnaround strategy for Johnson Pte Ltd.
QUESTION 2
Refer to the case on Smart Entertainment Videos Bhd (SEV) in Appendix B.
Required:
(a) What warning signs do you see of possible fraudulent financial reporting at SEV?
(b) What factors should SEV’s external audit firm consider during its audit of the financial statements, in light of the above warning signs?
(c) What types of earnings manipulation schemes might these warning signs indicate? Provide examples.
Appendix A: Johnson Turnaround
Introduction
Azmi had just joined Johnson Pte Ltd. (JPL), a public non-listed subsidiary of a fast moving consumer goods (FMCG) Hong Kong-based group of companies, as its chief executive officer in November 2009. He had been handpicked by the Chairman to purposely plan and execute an appropriate turnaround strategy. He’s now reviewing the financial statements and looking at the various options available.
General Company Background
JPL is located in the southern Indian region and was wholly-owned by the Indian government. Twenty years after began operations, the Hong Kong group of companies acquired 80%