Flat Cargo Berhad
Flat Cargo Berhad (FCB)
Introduction
FCB obtained listing in Bursa Malaysia on the 15 September 2001. The main core business was to provide air freight transportation within the Asian region. As a fast growing company, FCB secured agreements from well-establish company within the transportation industry such as Worldwide Express, United Parcel Services (UPS), Nationwide Express, City link and others.
Issue on FCB
1) The auditors were unable to verify the aircrafts claimed have been purchased by FCB in 2005. The audit team found a non-functional rundown aircraft barely worth 231 million in a hangar.
Aircrafts that was claimed have been purchased are categorize as an asset for FCB. It’s because the business nature in providing delivering transportation services to customer that generate income for the company. But acquired an asset must be recorded through legal transaction and within controlled of the company. These items are expected to be used in future activities that will generate cash inflows to the company. From the financial statement in 2005, the account equipment, at cost of the aircrafts acquired is increased and cash decreased for the same amount. But, failing to verify the legal amount of purchased assets, we consider the expenditure was not happening and the amount of fixed asset was overstated and the cash was understated in the balance sheet.
Non-functional aircraft barely worth 231 million in the hangar were a huge asset for FCB that within their control. We consider all the aircrafts have a diminished value for future periods, this asset should restate to its new estimated recoverable value and the amount of the write-off becomes an expense for the year 2005. An expense represents resources consumed by the FCB earning activities. All the non-functional aircraft supposedly reduce retained earnings for FCB. If the recoverable value is estimated 231 million, expense amount increased for 231 million and retained earning reduce that same amount
Introduction
FCB obtained listing in Bursa Malaysia on the 15 September 2001. The main core business was to provide air freight transportation within the Asian region. As a fast growing company, FCB secured agreements from well-establish company within the transportation industry such as Worldwide Express, United Parcel Services (UPS), Nationwide Express, City link and others.
Issue on FCB
1) The auditors were unable to verify the aircrafts claimed have been purchased by FCB in 2005. The audit team found a non-functional rundown aircraft barely worth 231 million in a hangar.
Aircrafts that was claimed have been purchased are categorize as an asset for FCB. It’s because the business nature in providing delivering transportation services to customer that generate income for the company. But acquired an asset must be recorded through legal transaction and within controlled of the company. These items are expected to be used in future activities that will generate cash inflows to the company. From the financial statement in 2005, the account equipment, at cost of the aircrafts acquired is increased and cash decreased for the same amount. But, failing to verify the legal amount of purchased assets, we consider the expenditure was not happening and the amount of fixed asset was overstated and the cash was understated in the balance sheet.
Non-functional aircraft barely worth 231 million in the hangar were a huge asset for FCB that within their control. We consider all the aircrafts have a diminished value for future periods, this asset should restate to its new estimated recoverable value and the amount of the write-off becomes an expense for the year 2005. An expense represents resources consumed by the FCB earning activities. All the non-functional aircraft supposedly reduce retained earnings for FCB. If the recoverable value is estimated 231 million, expense amount increased for 231 million and retained earning reduce that same amount