FLAT CARGO BERHAD CASE STUDY

Topics: Corporate governance, Auditing, Internal control Pages: 27 (2096 words) Published: December 3, 2013
Flat Cargo Berhad

Presented by:

Presented to:

ABDUL RAHMAN BIN YAACOB

AC088467

AFIFAH BINTI HALIM

AC088398

MAZIAH BINTI MOKHTAR

AC088445

MOHAMMAD AZWAN BIN BASHIRUN

AC088323

MOHD ZUBAIR BIN NOR AZMAN

AC086470

NABILAH BINTI SAAD

AC088349

SIR AZWAN ABD RASHID

INTEGRATED CASE STUDY ACSB 413

INTRODUCTION

Company Background
1997
Started operations with 2 aircraft
- Boeing 737-200F
- Cessna Grand Caravan
Operating Primarily
-Air cargo carrier
Principal activities of FCB
Subsidiaries
-Air Freight Service and Aircraft
Ground handling service

15 September 2001
-Obtained listing in Bursa Malaysia
Auditor
-Kenyans & Associates
In 2001 to 2004
-the have a fast growing at intra- Asian
air express market
-demand for express transportation
Services increased.
-give best delivering quality services
and satisfying customer
demand.

FCB Wholly Owned Subsidiaries
Cargo
management
Sdn Bhd

Fc Spare
Sdn Bhd

FCB (SPV)
Ltd

FCB Wholly
Owned
Subsidiaries

FC Air
Ltd

Cargo Air
Service Sdn
Bhd

FCB secured agreements with
well-established companies
Up to 2005

Bax
Global

CityLink

United Parcel
Service (UPS)

Nationwide
Express

Express
Worldwide
Nippon
Express

Top Management Team
Dato’ Ibrahim
Samad

• Chairman
• Independent non-executive director
• Former of Directors General for Ministry of
Transportation
• As a Malaysia chamber of commerce’s former
president

Mr Lim Loon Sim

• Chief Executive Officer (CEO)
• Founder for FCB
• Board member since 1997

Mr. Ali Bin Ahmad

• Executive Director
• Chairman of the company Audit Committee
• Member of its Employee Share Option Scheme
Committee
• Board since 1999

Mr. Kim Boon
Chok

• Chief Financial Officer

FCBH Financial Growth
In 2005

Ranked 4th
-Capital
Gains
-=Dividends

Analysts

Share Price
Dec 2001,
-RM1.89/shared
2005
-RM10.60/share

Able Pay Dividend
At a steady
3% for over
4 Years

Expecting revenue
FCB to increase to
54% or RM809
million.

Turnover
-2005,
RM550 million
-More than 1 ½
times than 2004

-Major Capacity

because

expansion.
and FCB want of
new aircraft.

QUESTION 1
It is important to seek public confidence in the
accounting profession where its role is to
maintain the integrity of corporate reporting.
Discuss the possible effects of Flat Cargo
Berhad’s (FCB) fraud in this matter.

Role to Maintain Integrity Of Corporate Reporting
Independence in Fact and Appearance
Code of Ethics for
Professional Accountants of
Auditor must approach
the International Federation
each audit with
of Accountants provides a
Independent auditors
professional skepticism
useful analysis of potential
should not only be
and must willingness independent in fact; they
threats to an auditor’s
and freedom to decide should avoid situations
independence under :
issues in an unbiased that may lead outsiders
• Self-interest,
and objective manner,
to doubt their
• Self-review
even their decision
independence
Advocacy
against the interests of
management.
• Familiarity
• Intimidation

Situation/Red
Flags
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 hangar.

Potential Fraud
-Old aircrafts, high
price tag
-Increasing holding
cost/storage cost

Several debtors’
-Increasing in
confirmation letters
debtors account
were returned
(asset)
because the
- Lead to possible
addressees had
of phantom clients
changed their mailing
addresses

Common Test
Procedure

Control Procedure

•Examine vendor’s
invoices & receiving
reports
•Physically examine
assets

•Every aircraft
purchases must have
invoice/grants
•Purchase high value
of asset must have
approval from top
level of company
(board of director)...
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