Chicken Run

Topics: Financial ratio, Financial ratios, Balance sheet Pages: 13 (4680 words) Published: May 15, 2013
Chicken Run
Case Leading Strategy| Analysis/Issue| Recommendations|
Audit & Investigations| The account of Cold Gold Sdn Bhd has been outstanding for a substantial period of time and its amount is relatively significant.| * To address the problem, delay doing transaction with Cold Gold immediately. Request for payment first to avoid the amount to be more significant. If there is a need to extend the credit before they pay the amount, further authorization from the credit controller and top management is require. * If there are possibility that Cold Gold could not pay the amount, provision for doubtful debt must be provided. * In the future, EPM should make it a practice to monitor each customer’s credit limit. When a customer reached the credit limit, must asked for payment before doing the next transactions. * In addition, statement of account must be send to all customers on regular basis preferably monthly basis as a reminder and to inform them the amount they owed. This practice will also enable customer to reconcile the amount in the statement of account that EPM had sent to them with their records. By doing this, any differences will be solved immediately.| | Confirmation letters from customers did not tie up with balances in the accounts.| * There may be two reasons on the problem to occur: * Firstly because the accounts receivables was not maintain properly. For examples, payments from customers were not taken up in the general ledger. * Secondly, theft on cash collections. * To overcome the first problem, double check the invoices and official receipt kept by customers as well as matching them with the company’s record. Any dissimilarity should be reconciled. Ensure that proper account is being credited. If there is customer’s payment which have not taken up in the company’s account, ensure that its amount have been credited in their accounts. * To detect any differences, it is very important for the company to issue proper documentation such as mentioned earlier which is the invoices and OR. Such invoices must be signed and stamp with company’s rubber stamp as well as signed by the accounts department. Issue delivery order (DO) when delivering the goods to customer and ensure that the details in the DO agreed with the details in the invoices. The DO must be signed by recipients. Each sale also must be taken up in the general ledger. For the OR, it must be stamped by the company and signed by the recipient. * Don’t forget to reconcile the personal customer’s account with the account receivables general ledger. * For the second problem, segregation of duties is required in which the person who collects the money must not be the same person who updates the cash payment in the ledger. This is to avoid the person who collects money from customer, conceal some of the money and then updates it in the ledger the amount after stealing them.| | Encik Kassim managed the finances of the company and also responsible for marketing plan.| * Problems will arise if Encik Kassim is responsible for both functions. For examples, he will construct a marketing budget which he have to allocate funds from operating budget to cover advertising, promotional and all other costs associated with marketing. He can allocate whatever amounts he thinks necessary but when it comes to obtaining the financial of the marketing plan, he can approve different amount that stated in the budget. * The person to manage the finance of the company must be segregated from the person who is responsible for the marketing plan. * In this case, they must delegate only one function to Encik Kassim either finance or marketing job. However, since he is a qualified accountant who had good experience in auditing, Encik Kassim is more suitable to manage the company’s finances. * EPM then have to employ other person to manage the company’s marketing strategy. In choosing good candidates for the marketing...
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