1.0 INTRODUCTION

Based on case study A Delima, students are required to identify issued based on certain topics. Before that, we are required to present our ideas and evaluate plans and strategies to overcome problems by applying relevant techniques during our class. In this case relate to the concept of true and fair view of Financial Statement and focused on skills and attitudes of people in an organization. Moreover, this case make us understand and shows accountant should comply with the Malaysia Financial Reporting Standard (MFRS) and International Financial Reporting Standard (IFRS) respectively to show the reliability of Financial Statement.
Besides, we are able to know the importance of corporate governance in the business world. A part from that, we are notice about the principle of separation of ownership and management in the company relating to the director’s fiduciary duty to the company. Plus, we need to recognize the code of ethics for Company Secretary. Last but not least, we should consider other aspects in this case to reflect the best recommendation to achieve the effectiveness and efficiency of the business management.

2.0 OVERVIEW OF THE CASE
A Delima case is about family businesses that are set up by Encik Zayed and Puan Hashimah. It conducted trading and supplying related products including manpower supplies to the oil and gas industries. Later in 2004, due to encouraging business growth, the enterprise was incorporated as Delima Enterprise Sdn Bhd (DESB). The two principal shareholders and controlling directors are Encik Zayed and Puan Hashimah (husband and wife). The company activities had expanded 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, with Encik Zayed as the Managing Director and his wife Puan Hashimah as the Chief Operating Officer. Puan Balqis work as the Operations Manager and Encik Salam as the Human Resource and Administrative Manager which are family members of the directors. In May 2006, Cik Amy was appointed and responsible for maintenance of the accounting and financial matters, including the preparation of accounts.
Luckily in May 2006, the company had secured a contract worth RM 750,000 to be implemented over duration of six months. Due to shortage of funds, the company had submitted applications to Malayan Banking Berhad and CIMB Bank Berhad for banking facilities totaling RM 1 million. The banks required the company’s Audited Financial Statements for the last two years. Unfortunately at that time Encik Zayed realized that the company never performed the statutory audit. In July 2006, Encik Zayed engaged the external Auditor Aziz & Co (Chartered Accountant) to perform statutory audit for the period 2003 to 2006.
The conflicts starts when the Auditors want to qualify the Financial Statement due to several unresolved issues but Encik Zayed and Puan Hashimah tried to negotiate to not qualify the Financial Statements. They also do not familiar with Accounting Standards and the provisions of the Companies Act 1965, including their roles and duties as Company Directors. The company had maintained a very lean organization and had employed family members as employed plus did not have the necessary working experience.

3.0 ISSUES AND RECOMMENDATIONS

4.1 Is there any abuse of power by the management and breach of fiduciary on the part of the directors?
Section 132 of the Act provides that a director of a company shall exercise his power for a proper purpose and in the good faith for the best interest of the company. According to the ‘Company Law in Malaysia’, a director of a company is required to fulfill the criteria in performing his duty in the company. Firstly, exercise his power honestly and with integrity in what they believe to be the best interest of the company. Secondly, Directors must act in the manner and within the power given and use the assets for proper purpose. Lastly, not to put himself in a position where there is a conflict between his duty to the company and his personal interest. Section 132(2) of Company Act 1965 provides clearly the circumstances that put the directors in a conflict of interest and therefore every director or officer of the company should not let himself in the position of conflict of interest to gain profit to himself without having any consent of a general meeting.
Directors are said to breach of fiduciary duty whenever he do not follow fiduciary duties circumstances required by law. Other than that, Director acts dishonestly to the interest of the company which he priorities himself rather than the company. Most of the powers of Director are power in trust. Therefore they should perform their duties for the best interest of the company and should not interest of the director or any officer. Moreover, being fiduciaries, the directors are treated differently and a higher standard of conduct is demanded upon them in the exercise of their fiduciary powers.
Based on the above case, there is abuse in power by the management and breach of fiduciary duty on the part of the directors. Also, there is conflict of interest between Encik Zayed’s duty to company and his personal interest. For example, when the Auditor expressed their intention to qualify the Financial Statements due to several unresolved issues, Encik Zayed tried to negotiate with the Auditor to not qualify the Financial Statements. He also planned to appoint a new “friendly party” auditor to negotiate. This is against the law. Apart from that, Encik Zayed charged personal vehicle expenses totaling RM 50,150 in the company account during the year 2005.

4.2 Who should be held responsible and accountable?
Directors are officer of the company and are regarded as an agent hence he is subject to duty of loyalty and good faith. Directors are also regarded as trustee since the property or money of the company is under their control and they are accountable for them. They are liable to refund to the company any of money or property if they improperly applied. Whatever power entrusted to directors, they must exercise the power honestly and for the best interest of the company and the shareholders.
As a director, Encik Zayed and Puan Hashimah play important roles plus establish mission and vision of the company so that the company will went well. Besides, director also set the strategy for the company and come out with brilliant and bombastic ideas so that the company can compete with other gigantic company. The directors must manage the company within the scope of authority given so as the act done binding the company.
As an officer of the company, Puan Balqis and Encik Salam should together with the directors in setting objectives and decision making as team group which normally comes out successful ideas. They responsible for the management and day-to-day operations of the organization. Other than that, they also responsible for the efficiency and effectiveness of the operation in the company. Person who is in charge in finance which is Puan Hashimah since Cik Amy did not have any working experience should ensure proper documentation information and data related to the transactions. Besides, she should maintain proper records on assets of the company as the records will be used as guideline or proof for the Auditor to do statutory audits. Accounting process also should be supervised regularly so that if there is any misstatements, finance staff able to do corrections.
According to Corporate Governance books, the position of company secretary in relation to the affairs of the company, has changed from being mere servant to a recognized officer wither greater responsibility. The Company Secretary’s Code of Ethics is formulated to enhance the standard corporate governance and good corporate behavior. In the performance of his duties, a company secretary should strive for professional competency at high degree of skill in the performance of the duties. Other than that, at all times exercise the utmost good faith and act both responsibility and honestly with reasonable care and due diligence.
Next, assist and advise the directors to ensure that the company maintains an effective system of internal control for keeping of the necessary registers and accounting records. Last but not least, have a clear understanding of the aims and objectives of the company and restrictions as provided in the Memorandum and Articles of Associations of the company.
Based on this case, not only Encik Zayed and Puan Hashimah but the entire employee as well as Company Secretary should be responsible and accountable to what happened in the company. Even though Encik Zayed and Puan Hashimah are the directors and person who make the last decision, other officers can give their opinion also to help top management give the best decision making. Employee at below level should aware with the job entitled to them and give the best result as what the top management wants. They should comply and fulfill all the corporate goals set by top management. Furthermore, Company Secretary should assist and advise the company towards proper objectives so that they together cooperate in making decision making.

4.3 Could the Audit be completed soon without any qualification?
The Audit cannot be completed without any qualification because the Auditor must qualify the Financial Statements so that the Financial Statements can be verified with true and fair view. Other than that, Audit need to be completed but the Auditor still need to qualify things that he think suspicious.
In this case, audit must be completed but Auditor needs to qualify the Financial Statements of the company. This is because there are reasons why the auditor must qualify the Financial Statements due to unresolved issues. First is several pages of the Account Receivables listing were missing were the sum of RM 250,000 was wrongly recorded into General Ledgers. But no one had reviewed the record. Second, EPF contributions were not provided by the company to the employees which against accounting standards of FRS119 Employee Benefit.
There are four types of audit report namely unqualified report, qualified audit report, disclaimer of opinion and adverse report. Under Section 174(1), auditor must report to the members of the company on the accounts, which are to be presented before the company at the annual general meeting. The auditor is required to state in his report on his findings, and in his opinion, properly drawn up to give true and fair view of the matters required by Section 169 of the Companies Act. Qualified audit report will be issued when the auditor take into considerations one of two types of situations which do not comply with generally accepted accounting principles. Firstly, the company do not provide EPF Contributions to the employees which against FRF119. Secondly, several pages of Account Receivable were missing and the auditor cannot observe and find out the documents related to the sum of RM 250,000.

4.4 What should be done to improve the leadership and management of Delima Enterprise Sdn Bhd?

4.5.1 LEADERSHIP

Firstly, the directors do not familiar with their duties and roles. Other than that, they could not understand what exactly jobs they should do. Section 132(1A) of Company Act state that as a director, they must have the knowledge and skills that are expected to possess depends on the responsibilities. For example, Encik Zayed and Puan Hashimah tried to negotiate with auditor to qualify the Financial Statements which against the duties of the directors. Encik Zayed has shown that he is incompetent since he is trying to negotiate with the auditor. This will led the business not long lasting because of the attitude of the director. As a directors, they should update their knowledge and skills by attend training, seminar that is related to the business. Other than that, directors should refer to Company Secretary for every decision making.
Secondly, the employees lack of competency which the leadership power are not stronger. Head of department are leaded by unqualified staff which they are not meet the academic requirement and experience required by company. In this case, it is clearly stated that Cik Amy is graduated from a local University but had no working experience. All jobs related to finance are taken over by Puan Hashimah which is supposed not to do the finance’s works. Prior to Cik Amy’s appointment, Puan Hashimah do all the works that related to finance since Cik Amy is a fresh graduate. Before hire employee, they must fulfill the entire requirement as stated before do the interview. If the company wants to hire fresh graduate, they must provide training for them to equip employees with proper knowledge and skills. 4.0

Thirdly, there is no clear vision and objective as stated in this case. The company only has mission which is to become a leading service contractor and provide quality products and excellent services. It is difficult for company if there is no vision since vision and objective led to successful business. Other than that, the employee has no direction in performing their tasks. The company must state and inform clearly the vision and objective of the company to the employees so that they are clear with the jobs given.
Other than that, Human Resource Department should concern on their work which relating to the employee’s welfare. In this case, the EPF contribution is not deducted and remitted to EPF which is against FRS 119 EPF Benefit. The staff should know EPF contribution must be deducted from EPF. This happened since the company hire unqualified and inexperience workers such as Encik Salam and Puan Balqis. It will impact performance of the employees as they unable to work well due to lack of knowledge. It will give bad reputation of company. Moreover, staff that is responsible to pay salary must pay in monthly basis including EPF and SOCSO. They also responsible to hire qualified employees and must implement Standard Operating Procedure during employee’s recruitment.
Next I found that no Standard Operating Procedure was applied. SOP is documented practices designed to ensure consistency in business practices and operations. So the company should provide a detailed of work instruction, procedures and process which will Increase efficiency and consistence in performing task. All decision is authorized by Encik Zayed and Puan Hashimah. Moreover, no reconciliation was performed for each account. It will give difficulty in preparing financial statements. Besides, some withdrawals are made from the company without proper documentation. This will led to misuse of power which every employee can take for granted since there is no tight procedure. They also should make improvement regarding to attendance since it is manually record. May be the company can use thumbprint system instead of manual. So each department should implement SOP and ensure compliance to SOP in every decision making and documenting.

3.4.2 MANAGEMENT
The management had maintained a very lean organization with basic functional positions. As a big company, since the name change to Delima Enterprise Sdn Bhd due to encouraging business growth, the company should has effective and regulated nicely position which the roles of each employees should be mentioned. It is as a guideline to perform their tasks.
When it is come to the accounting system, it has improper records of documentation and transaction. The sale’s invoice and purchase order are prepared manually and not pre-numbered. Besides, MYOB programmed was not integrated and several pages of Account Receivables listing are missing. This will make works become longer as it takes time to find missing pages. Other than that, fraud might happen because there is incomplete document to be reviewed. In my opinion, the company must adopted auto pre-numbered system. Hence, all documents are properly pre-numbered and documents are properly kept and up to date.
Next issue is manual record on employee’s attendance. The employees prepared manually their attendance without any supervision. Moreover, Puan Hashimah paid salaries based on the attendance sheet which supposedly not based on that sheet. This is because the employee can cheat on their attendance or may be take someone else to record their time arrived even he himself are absent. It is unfair to employee who works every day without any reason. I am recommend the company to have time tracking tools which is useful for company who wants to manage time better, become more productive and can track an employee’s work hours. Other than that, the company should appoint supervisor to monitor employee’s attendance.

The company lack segregation on duty which employee does not know their own tasks and responsibility. Prior to Cik Amy’s appointment, Puan Hashimah was responsible for all finance related matters. So the company’s entire burden was handled by Puan Hashimah alone even though she hire finance’s graduate. This happen due to insufficient experience since Cik Amy had no experience and a fresh graduated. So, Human Resources Department should divide the task for each employee to ensure the work become more efficient and effective. They also will perform well in performing their own jobs.

4.0 CONCLUSION
As a conclusion, I hope that the company can reduce and fix the problems as there are lots of insufficient and misuse of document. This is to ensure the company can make better improvement and performance afterwards. In order to be the best among the best, Delima Enterprise Sdn Bhd must restructure the company positions plus sent existing employee for training. It will give benefit for both company and employees as the company will have better and knowledgeable productions and employees will increase their soft and communication skills as they learn in training.
Other than that, by improve their Standard Operating Procedure, the company will have organized chart structure and they know exactly jobs that they perform. It will lead to efficiency and competence worker as they have guideline to do their tasks.

5.0 REFERENCE Companies Act 1965 Companies Commission of Malaysia, the Secretary’s Code of Ethics
Rachan, Shanty; (2002), Principle of Company Law in Malaysia, Kuala Lumpur, Malayan Law.
W. Hashim W. M, Zakaria M.(2010), Introduction to Company Law in Malaysia, University Publication Centre (UPENA), Selangor.