Report of Maf 680

MAF 680 REPORT The problem faces by the Delima Enterprise Sdn. Bhd can be solve if the company implement some sort of internal control system in all activities. A system of internal control consists of policies and procedures designed to provide management with reasonable assurance that the company achieves its objectives and goals. Typically, there have three broad objectives in designing an effective internal control system, reliability of financial reporting, efficiency and effectiveness of operations and compliance with laws and regulations.
Standard Operating Procedure (SOP) is one of the internal control systems that can be implemented by the company. A Standard Operating Procedure (SOP) is a set of written instructions that document a routine or repetitive activity followed by an organization. The development and use of SOPs are an integral part of a successful quality system as it provides individuals with the information to perform a job properly, and facilitates consistency in the quality and integrity of a product or end-result.
The term “SOP” may not always be appropriate and terms such as protocols, instructions, worksheets, and laboratory operating procedures may also be used. SOPs will detail the regularly recurring work processes that are to be conducted or followed within an organization. They document the way the activities are to be performed in order to facilitate consistent conformance to technical and quality system requirements and to support data quality. They may describe, for example, fundamental programmatic actions and technical actions such as analytical processes, and processes for maintaining, calibrating, and using equipment.

SOPs are intended to be specific to the organization or facility whose activities are described and assist that organization to maintain their quality control and quality assurance processes and ensure compliance with governmental regulations. SOPs should be written and documented properly for easy use and refer. If not, SOPs are of limited value. In addition, the best written SOPs also fail if they are not followed. Therefore, the use of SOPs needs to be reviewed and re- enforced by management, preferably the direct supervisor.
Furthermore, the written SOPs should be put in place that is easy to see mostly for individuals who involve directly in the activities. In preparing the SOPs, the company should have a procedure in place for determining what procedures or processes need to be documented first. Those SOPs should then be written by individuals knowledgeable with the activity and the company’s internal structure. For example, in the case of Delima, Puan Balqis or Encik Salam should be the suitable person for this task. The other way is, they can also create a group or team for preparing SOPs.
By using SOPs, the Delima should be able to prevent the mistake as well as errors in performing the operations. In terms of sales, for example, the employee will know what to do from the time of receiving orders until producing the invoice even if he or she do have any special skills in that area. Hence, SOPs should be prepared in a simple way, so that, individuals with basic understanding can understand. Another internal control that can be implementing by Delima Enterprise is Segregation of Duties. Segregation of duties is a concept of having more than one person to complete the task.
It is basically to have one person handle only one type of task or power. Segregation of duties is critical to effective internal control because it reduces the risk of mistakes and inappropriate actions. It helps fight fraud by discouraging collusion. Example of segregation of duties such as the person who requisitions the purchase of goods or services should not be the person who approves the purchase. Regarding the Delima case, Puan Hashimah is responsible for approval of employee’s timesheet as well as payment of salaries.
Supposedly, she only given the approval of the timesheet only, and the payment should be done by other person such as human resource personnel. So, when Delima implementing a proper internal control system as mention above, its can prevents and avoid any major mistake happens. Because, SOPs for example, it has given the instruction about the procedures to be done. Also, when implementing the segregation of duties or powers it can prevent a person from able to do frauds because the concept of one person with one task only AGMCORPORATE GOVERNANCE •
Cik Amy do not have enoughknowledge and experience inher field of work. • Company should provideguidance and training to newemployees. • Management should hiresomeone that is capable indoing his work. NO STANDARD OPERATINGPROCEDURE (SOP) • Withdrawal of company’smoney made without properdocumentation. • Decision and authorizationmade by the directors on itsown without properdocumentation • It will increase the risk of fraudand inconsistency in performingtask • Give the auditor hard time tokeep track of the transactionand movement of asset. Delima should implement standardoperating procedure (SOP) : •
Increase efficiency andconsistence in performing task • Indicate compliance in theentity requirements and can beused to train others LACK OF COMPETENCY • Head of department leaded byunqualified staff • Does not spend on training of staff • Decrease companyperformance as a whole • Discredit the companyreputation • Spend more on training toequip employee with properknowledge • Should hire qualified staff thathave experience • Employees manually preparedtheir timesheets. • No staff in charge and monitoremployee attendance. • Staff take advantage overthe slackness • Decrease in companyperformance ••
Install automated timeattendance5 C’S CREDITWORTHINESSThe 5 key elements a borrowershould have in order to obtaincredit : 1. Character a Integrity / a borrower’s reputation 2. Capacity a company’sborrowing history 3. Capital a Net worth 4. Collateral a Assets to securethe debt 5. Conditions a Of the borrowerand the overall economyEg. interest rate and amount of principalRECORDING • Several assets purchased bythe company were notrecorded • Every asset purchased must berecorded manually andcomputerized. • Assign person(s) to beresponsible for the companyassets. • Create an Asset ManagementDivision. •
Propose the Asset TaggingSystem. LEAN ORGANIZATION • Lean organization with basicfunctional position • Position & function should beclarified clearly. ACADEMIC QUALIFICATION • Did not meet academicqualification or relevantexperience that required bythe company • Hire people that have goodacademic qualifications &relevant experiences. STATUTORY AUDIT • Company did not perform theStatutory Audit • Only legal to Public ListedCompany. Not compulsory forPrivate Company to performS. A • Private Companies may needto do so when applying forloans and etc from FinancialInstitutions. AUDITOR’S DUTIES ANDRESPONSIBILITIES •
Encik Zayed tried to negotiateauditor to make unqualifyreport • Sec 174(2)Express opinion in report (dutyto report defects, irregularitiesin account) • Sec 174(3)Report particulars of deficiency, failure andshortcomingPROBLEM IN FINANCE DIVISION • Invoice not pre-numbered • Appoint new finance managerto authorize and supervise • Company did not sendStatement of Account(SOA) toclient • Not prepare monthlyreconciliation • Use company’s money forpersonal use • No segregation of dutiesfinance department • Separate duties according towork position • Emphasize the separate legalentity conceptACCOUNTING SYSTEM MYOB Software not integrated • Purchase new software • Eg: UBS, SAP Software,Ramcon Engineering,Autocount,etcPROBLEM IN HUMAN RESOURCEDIVISION • Pay wages weekly withoutemployees benefit • Unqualified staff (lack of knowledge and experience) • Lack of employees andunbalance staff allocation • Pay wages in monthly basisincluding EPF and Socso • Provide training and seminarfor staff • Assign more staffs withqualification • And re-organise chartWere there any abuses of power bymanagement and breach of fiduciaryon the part of the directors? YESWho should be held responsible andaccountable?
NOT ONLY DIRECTOR, ALLMANAGEMENT LEVEL SHOULDBE RESPONSIBLE ANDACCOUNTABLECould the Audit be completed soonwithout any qualification? • Yes, the audit report can beclassified as qualified opinionreport due to severalunresolved issues. If theauditor audited the rest of thefinancial statements and isreasonably sure that theyconfirm with GenerallyAccepted Accounting Priciples(GAAP), then the auditorsimply states that the financialstatements are fairlypresented, with the exceptionof the issues which could notbe audited. What should be done to improve theleadership and management of Delima Enterprise Sdn Bhd? SUME JAWAPAN DIATAS…