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Flight of Funds

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ntroduction
Mr Idris Bin Junid was appointed as new Chief Executive Officer in the holding company,
Travel Investment Holding Bhd (TIH). One of TIH’s subsidiary is Malaysian Travel Sdn
. Bhd. (MTSB). MTSB had invest in MTT as joint venture holding 40% equities with Turkistan Global Services Sdn. Bhd. (TGS) holding another 60%. The director of MTSB, Yatim Nor who is the father of board member in TGS, Omar Yatim, had signed the agreement to form MTT. The external auditor appointed by TIH has discovered several irregularities in MTT.
MTT’s paid up capital increasing from RM2 to RM 250000. MTSB is paid RM8 per share for 100000 units to acquire 40% shareholding in MTT. No audited account had been issued to the shareholders since no any filing made with Companies Commission of Malaysia (CCM).
Issue 1: Misconception between joint venture and associate company Joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control (the venturers).Every venturers will have the right to veto any significant decisions even they own less than 50% of share. An associate company is a company in which another company owns a significant portion of voting shares. An owner does not consolidate the associate's financial statements unless the share owned is more than 50%. In fact, Malaysian Turkistan Travels Sdn Bhd is a joint venture company but the office manager had been instructed to inform the auditors that MTT was an associate company accounted for using the equity method and the amount invested from a group point of view was immaterial for consolidation.

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