Flat Cargo Berhad
Introduction
Air Cargo Industry is a highly competitive with low profit margin industry operated by 85 operators within Malaysia and the Asia Pacific region. Flat Cargo Berhad (FCB) was one of them with several subsidiaries related to this industry. FCB was recognized as one of the biggest air freight companies in Malaysia. With the flourishing of e-business and secured agreements with well-established companies (i.e UPS, Nationwide Expressway, Citylink,
Nippon Express etc), the boom of Flat Cargo Berhad was obvious. Even it was expected,
FCB would have likely remained as the nation’s leading air cargo carrier if the scandal has not appeared. Things have started to get out of shape for FCB when the external auditor
Kencana & Associates came across several suspicious findings that may suggest fraud. So we as consultant/advisor have noted down the problem and came up with the possible solutions in order to handle such suspicious circumstances.
Problem 1
The auditors were unable to verify the aircrafts claimed to have been purchased by
FCB in 2005. The audit team found a non-functional rundown aircraft barely worth
RM231 million in the hangar.
FCB claimed to have purchase aircrafts in 2005, but there were no documentation found to support the claims of FCB that the purchasing ever took place which implied that fraud might have took place.
As shown on the fleet information above, (Appendix B) there were two Boeing 727 and five
Mcdonnell Douglas MD-11F (which later was no longer used for freight purposes) purchased by FCB in 2005 that were in “Active” status, but when inspected by the audit team, found
Mior, Asif, Stephanie, Rohanna
only a rundown non-functional aircraft in the hangar which suggested inconsistency in the claim made by FCB.
Solution 1
The audit department could take some measures to verify the claim made by FCB regarding the purchase of the aircrafts by
1) Referring to the aircraft manufacturers regarding receipts,
Air Cargo Industry is a highly competitive with low profit margin industry operated by 85 operators within Malaysia and the Asia Pacific region. Flat Cargo Berhad (FCB) was one of them with several subsidiaries related to this industry. FCB was recognized as one of the biggest air freight companies in Malaysia. With the flourishing of e-business and secured agreements with well-established companies (i.e UPS, Nationwide Expressway, Citylink,
Nippon Express etc), the boom of Flat Cargo Berhad was obvious. Even it was expected,
FCB would have likely remained as the nation’s leading air cargo carrier if the scandal has not appeared. Things have started to get out of shape for FCB when the external auditor
Kencana & Associates came across several suspicious findings that may suggest fraud. So we as consultant/advisor have noted down the problem and came up with the possible solutions in order to handle such suspicious circumstances.
Problem 1
The auditors were unable to verify the aircrafts claimed to have been purchased by
FCB in 2005. The audit team found a non-functional rundown aircraft barely worth
RM231 million in the hangar.
FCB claimed to have purchase aircrafts in 2005, but there were no documentation found to support the claims of FCB that the purchasing ever took place which implied that fraud might have took place.
As shown on the fleet information above, (Appendix B) there were two Boeing 727 and five
Mcdonnell Douglas MD-11F (which later was no longer used for freight purposes) purchased by FCB in 2005 that were in “Active” status, but when inspected by the audit team, found
Mior, Asif, Stephanie, Rohanna
only a rundown non-functional aircraft in the hangar which suggested inconsistency in the claim made by FCB.
Solution 1
The audit department could take some measures to verify the claim made by FCB regarding the purchase of the aircrafts by
1) Referring to the aircraft manufacturers regarding receipts,
References: Ready Ratios. Generally Accepted Accounting Principles (GAAP), Available:http://www.readyratios.com/reference/accounting/generally_accepted_accounting_ principles_gaap.html. Last accessed 4th Feb 2014 Mior, Asif, Stephanie, Rohanna