Financial Audit and Company

Topics: Financial audit, Financial statements, International Financial Reporting Standards Pages: 9 (3317 words) Published: July 15, 2012
Delima Case Study
Delima Enterprise Sdn Bhd (DESB) founded in 1981 by Encik Zayed. It conducted trading and supplying related products including manpower supplies to the oil and gas industries. The husband and wife which are Encik Zayed and Puan Hashimah were the two principal shareholders and controlling directors for the company. The company expands into provision of engineering services as part of their business diversification and expansion plans. The company had maintained a very lean organization with basic functional positions. DESB employed their own family members to work in the company with minimal education background and some of them did not have the necessary job experience. In May 2006, the company had employed Cik Amy, a fresh graduate from local university since April 2006 and had no working experience to be their Finance Executive. At the same time, the company had secured a contract worth RM 750,000 to be implemented over a durations of six months. In order to secure the contract, Encik Zayed had applied for banking facilities due to the company’s shortage of funds, which required the Audited Financial Statements had to be issued to the bank at least by September 2006. Cik Amy was assigned to analyze and provide the Auditors with the necessary clarification and documentation, as Delima Enterprise Sdn Bhd (DEBS) had not performed the statutory audit. It was July, 2006 when Encik Zayed engaged the external Auditor Aziz & Co, introduced by his friend to perform the statutory audit for the period of 2003 to 2006. That was the first audit experience for the couples and it was a difficult learning experience. The Auditors expressed their intention to qualify the Financial Statements due to several unresolved issues. However, Encik Zayed and Puan Hashimah tried to negotiate with the Auditor to not qualify the Financial Statements, failing which Encik Zayed planned to terminate the auditor’s appointment and appoint a new auditor which he can negotiate with. Both directors Encik Zayed and Puan Hashimah were not familiar with Accounting Standards and the provisions of the Companies Act 1965, including their roles and duties as Company Directors. The directors of the company should know better about the Financial Reporting Standards to help them to manage their company successfully. Other than that, financial reporting is very important in the company. Financial reports are the documents and records you put together to track and review how much money your business is making. The purpose of financial is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly related to an organization's financial position. On the other hand auditing is also an important part in the company. Auditing is an examination and verification of a company's financial and accounting records and supporting documents by a professional, such as a Certified Public Accountant. According to Companies Act 1965, stated in Section 172 (1), the auditor must be appointed before the first annual general meeting of the company. Auditors opinion are very important for the company as it is a certification that accompanies financial statements and is provided by the independent accountants who audit a company's books and records and help produce the financial statements. The auditor's opinion will set out the scope of the audit, the accountant's opinion of the procedures and records used to produce the statements, and the accountant's opinion of whether or not the financial statements present an accurate picture of the company's financial condition. Delima Enterprise practised a poor management and not well organised. There were abuses of power and breach of...
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