Integrated Case Study

(MAF 680)
A Delima
PREPARED BY:
NAME STUDENT I/D CLASS
Muhammad Shamil b Sabaruddin 2012825964 AC2208A
Farhan Aizuddin b Mohd Nordin 2012684402 AC2208A
Zulaikha Bt Haji Othman 2012493194 AC2208A
Hamizah Izzati Bt Mohd Nasir 2011979765 AC2208A
Siti Aisyah Bt Zakaria 2012832484 AC2208A

PREPARED TO:
Madam Hajah Norlaila Bt Abdullah

A Delima Case Study 1


Issues arise in Delima Enterprise Sdn Bhd
In Delimas case, there are many issue arise in the daily transactions of this organization. Below are the
list of issues, causes, effect and solution recommended for each issue.

1. Unclear vision and mission
Refer to the case; Delima Enterprise Sdn Bhd does not have a clear vision and mission. Vision
will show the goals of an organization are in general. It provides a fundamental statement of an
organization values, inspirations and goals. For mission, its explaining the purpose of the organization
towards its stakeholders. Delima Enterprise comes out with an ambitious aim which to become a leading
service contractor and provide quality products and excellent services. However, the company does not
provide any vision to represent its long term goals. Therefore, the employees might not see a clear
objective of an organization as a whole and they probably loosing track in conducting their tasks. As a
leader, Encik Zayed should develop and implement a vision so that the employees are align with the
companys targeted objectives and putting together their effort to achieve it. Not all vision will be
achieved by the company. It depends on how the company reacts, strategies and chosen of decision.
2. No standard Operating Procedure
Delima Enterprise Sdn Bhd is a successful company and being awarded for several engineering
project in their business field. Unfortunately, the company is not implementing any standard operating
procedure (SOP). This might due to lack of knowledge and skills for both managers which are Encik
Zayed and Puan Hashimah. As a managers and owner of Delima Enterprise Sdn Bhd, they should seek for
relevant information such as Accounting Standards, Companies Act 1965 and the important of Standard
Operating Procedure (SOP) for the company. As refer to internet resources, Standard Operating
Procedure is a detailed written instruction to achieve uniformity of the performance of a specific
function. It will help to maximum safety and operational efficiency for the organization.
Related to the case, there are few issues related to Standard Operating Procedure which are no
authorization made by the company regarding the sales invoice, purchases of assets and purchase order

A Delima Case Study 2

as well as no proper procedure in selecting new employee. Therefore, there is no proper guideline and
procedures for employees to performing their task. It may cause the employee work in different way
from a standard procedure and lead to omit of record. Thus, the company should implementing
Standard Operating Procedures (SOP) as a manual for employee to review their step by step process in
performing task.
3. Problem in Human Resources Division
Encik Salam is the person who in charge on Human Resources and Administration Department.
There are some of problems arise in this department which include staffing problem, no deduction of
EPF contribution, no training for employees and payment wages weekly in cash basis. Basically, the
company is hired unqualified and unskilled employee to handle certain field of work and the company
does not provide training or seminars for increase the employees knowledge and skills. This will cause
inefficient performance of employees because they still lack of experience in doing their scope of job.
Currently, Delima Enterprise was paying wages to their employees for every week on cash basis
without employees benefit. As a medium size company, usually they will make a payment salary on
monthly basis by using electronic transfer system. Thus, it easier for the company to monitor and
avoiding unnecessary things happen like theft, robbery and others.
For the EPF contribution, it is compulsory for every company to contribute some provision for
their employees. According to EPF act 1991, provide for the law relating to a scheme of savings for
employees' retirement and the management of the savings for the retirement purposes and for matters
incidental thereto. Related to the case, Delima Enterprise is not deducting EPF from the employees
salary, and it is against the law. In facts, the company is not look after their staff welfare. Therefore, the
company needs to contribute EPF deduction to fulfill the requirement in EPF act 1991.






A Delima Case Study 3

4. No budget planning
In this case, the auditor found that Delima Enterprise Sdn. Bhd. did not have project budget and
analysis. Budget is a detailed plan that shows the financial consequences of an organizations operating
activities for a specific future time period. It is a tool which is important to the organization especially
to operating department to determine the allocation of the money to the project at specific time and
amount. In this case, the budget planning was not prepared due to incapability of the Chief Operating
Officer, Puan Hashimah to understand the benefits of budget planning to Delima Enterprise Sdn. Bhd.
This will lead to several problems facing by Delima Enterprise Sdn. Bhd.
First is, there is no clear communication and coordination occur. This is because; budget
planning let communication among top managers and employees of the company. It means that; it
helps the managers to understand the strategies that want to implement by another managers. If there
is no budget planning that has been made, it will be difficult to the managers to understand the strategy
and it will to miscommunication among the managers of the company and employees of the company.
Second, without budget planning, it will difficult to allocating the resources. This is because;
there is no specific requirement on how the raw material, financial and human capital needed in specific
project. This will bring to wastage of resources if they are not allocating it efficiency and effective.
Moreover, there will be inefficiency and ineffectiveness of operating the project since there is surplus of
resources which is allocated to the project.
Thus, a proper budget planning is crucial to the company especially Delima Enterprise Sdn. Bhd.
This is because, it will help Delima Enterprise Sdn. Bhd. on how planning and executing the project
efficiently and effectively. Besides; Delima Enterprise Sdn. Bhd. DESB can facilitating the communication
among the top managers and employees of the company. Moreover, it helps the company to
monitoring and evaluating the performance of employees, departments and operation of the company.
Besides that; it will help the top manager to construct the initiatives for employees of the company.





A Delima Case Study 4

5. Accounting principles and recording
In this case, the auditor found that there are a few mistakes that have been made by the Delima
Enterprise Sdn. Bhd. which is violent to the accounting principles and standards. In this case, the auditor
found that there is an overstated in the cash and bank balance. Besides that, the preparation of
statement of financial position and statement of comprehensive of income is not well prepared in
accordance with Accounting standard. Not enough that, omission and mistakes in preparing financial
statement that have been made by Puan Hashimah before Cik Amy appointed as Finance Executive at
Delima Enterprise Sdn. Bhd. For example, the cash advance that have been made by En. Zayed to the
company is classified as trade receivable. Besides that; there is transaction which is recorded twice in
general ledger happen in 2004 in trade receivable amount to RM40,000.
Not enough that, therere is an inappropriate documentation of withdrawing total RM 12,500 from
the company. This will cause to losing of the money if they cannot keep the proper of documentation of
the transaction. Besides that; there are several assets purchased by the company were not recorded.
This will lead to undeclared assets made by the company. Besides that, the records and the files were
not well organized. This will difficult to the others to read and understanding the financial result made
by the company.
Thus, a proper recording and filling is need. Besides that; the asset management should be done
every month in order to avoid the losses and undeclared of assets. For example, the clerical clerk needs
to count the assets which are held by the company. Not enough that, the company should assign
someone who has a better understanding of accounting principles and standards so that the recoding
the transaction can be make without any omission and mistake. Which this, the company can construct
the statement of financial position and income statement in according to MFRS101: Presentation of the
Statement.






A Delima Case Study 5

6. Problem in finance division
In this case, there are several problems facing in this process. In this case, Delima Enterprise Sdn Bhd
does not giving any official receipt to the customers. Besides that, Delima Enterprise Snd. Bhd. does not
preparing the monthly statement of account to their customers. Not enough that the company is
lacking of authorization since the directors can use the companys money for their personals purposes.
This will cause the company having an insufficient of fund. Another problem is; there are no segregation
duties that have been done by the company. This is because; Puan Hashimah is the only one who is the
only one who received the collection to preparing the financial statement. Thus, it will lead to the error
and mistakes since there is no one who can monitor and evaluate the processes that have been made by
Puan Hashimah.
The solutions are, the company should have a proper documentation of pre-numbered of invoices
to the customers. Not enough that, the company should have a separate division from finance division
and form a new division called sales and collection division. This will be easier to the company in
handling the sales and collections.
Second is, the company should appoint a finance executive so that the finance executive can
monitor the activities of companys financial. Besides that, it will prevent Puan Hashimah from having a
massive overload of jobs which she needs to be done.

7. No segregation of duty
Relying on one person to handle others job in company could allow one person to commit fraud
and make a wrong decision that may result in financial loss or misstatement to the company. In Delima
Enterprise Sdn. Bhd. case, COO of company Puan Hashimah was handled in the approval and payment of
salary which it is Payroll departments duty. She may take advantage on it for her interest or may make
mistake in payrolls decision. The solution is to improve the internal control of company. For example,
the approval and payment of salary duty should be handles by Payroll department and COO of company
only focus on monitor the companys operation.




A Delima Case Study 6


8. Lack of training
Employees lack of training because the employer was not willing to commit and invest on necessary
training. They may make a lot of mistakes and cannot performing their daily job because they have no
experience and knowledge how to performing their job that had been assigned to them. In this case,
Encik Zayed and Puan Hashimah lack of training since they were not familiar with Accounting Standards
and the Provisions of Companies Act 1965 where they should engaged the external auditor since they
incorporate the Delima Enterprise Sdn. Bhd.
Thus, a proper training and seminar mush held by the company to their employees. This is to ensure
that the employees gain the knowledge and a better understanding about their responsibilities and
duties as employee of Delima Enterprise Sdn. Bhd.

9. Improper organization chart
The organization chart of Delima Enterprise Sdn. Bhd. is improper and not complete because
managers are not in parallel functional under Chief Executive Officer and Chief Operating Officer and
there also have a short of several managers that very important to the company in run the business. For
example, Human Resources manager, operation manager and finance executive should be in parallel
functional under CEO and Chief Operating Officer and there should add more managers such as payroll
manager and also marketing and sales manager to complete the organization chart.









A Delima Case Study 7

Question 1
Analyze whether Delima Enterprise Sdn Bhd has a good working capital standing?
Type of
Ratio
Formula 2004 2005
Liquidity
ratio

Current ratio
=Current Assets
Current liabilities

RM 1,574,173
RM 914,152
=1.722


RM 969,685
RM 553,192
=1.753

As refer to the analysis ratio above, there are three ratio related to measure the working capital of
Delima Enterprise Sdn Bhd.
Liquidity ratio
Liquidity ratio shows the ability of the company to cover its short term obligation or its current
liability. In other word, it measure the ability of a company to pay off its short term liability when they
fall due. It also will shows the number of times the short term obligations are covered by cash and liquid
asset. If the value is greater than one (1), it means the short obligations are fully covered. There are two
method that can be measure in liquidity ratio which are current ratio (working capital ratio) and quick
ratio.
Current ratio for Delima Sdn Bhd in year 2005 is higher than 2004. It is shows that the company
has better performance in year 2005. The company may have enough resources to pay its debts over
the next 12 months due to its ability to turn its product or services into cash.
For quick ratio, Delima Sdn Bhd facing lower ratio in year 2005. It is shows that the company has
worse performance in year 2005. It is due to poor cash management. The company should offering
some discount to its debtors in order to collect their debts.


A Delima Case Study 8

Question 2
Analyze the growth of the company operating performance
Type of
Ratio
Formula 2004 2005
Profitability
ratio
Gross profit margin
=Gross Profit
Sales

=143,165
1,700,525
=0.084

=113,187
897,050
=0.126

Profitability ratio
It is shows how effective the company use it assets to make profit. These ratio assess the ability
of a company to generate earning, profit and cash flows. It also indicate firms efficiency in controlling
cost and its price policy.
The gross profit margin for Delima Sdn Bhd shows higher ratio in 2005. It means that the
company has better performance as compared to 2004. This is because the company have well manage
in using all resources, materials and labour.









A Delima Case Study 9

Question 3
Delima Enterprise Sdn. Bhd.
Standard Operating Procedures.

Purpose: It is a guideline which is compulsory to follow in order to enhance a healthy working
environment among directors and employees of Delima Enterprise Sdn. Bhd. This Standard
Operating Procedures (SOP) is including this activity:
1.0. Payroll Activities
1.0. Payroll Activity
1.1. The Human Resource clerk will update the information of the employees of
Delima Enterprise Sdn. Bhd. in the employee master file.
1.2. The payroll department will set the pay period for the employee of Delima
Enterprise Sdn. Bhd. The Chief Operating Officer will verify the pay period module.
1.3. The payroll department will enter time worked by employees of the company
into payroll master file. They will enter it using time sheets prepared by operating
department. From this, the payroll department will calculate the gross wages.
1.4. If there is a pay adjustment from previous periods or payments which related to
initial hiring or the termination of employees of the company, the payroll
department is responsible for entering the amounts of any manual paychecks that
have not yet been recorded in the payroll system.
1.5. Termination pay needs to be calculated to any employee whom has left the
company, including their unused vacation time and severance pay.
1.6. If there is any changes to the standard deductions from employee pay, such as
medical insurance, garnishments and charitable contributions, an alteration to the
deductions need to be done.

A Delima Case Study 10

1.7. All the payment will record in payroll master file. At the end of the month, the
report will be prepared and send to Chief Operating Officer for authorization.
1.8. The errors and omission of the transaction will avoid if there is a review and
corrected if there is an authorization and verification made by chief operating officer
and operating manager.

















A Delima Case Study 11

Question 4
Where there any abuses of power by the management and breach of fiduciary duty on the part of the
directors?
Yes, there are abuses of power by management and breach of fiduciary duties of directors.
Firstly, En Zayed used his power as director to appoint his family members, Encik Salam and Puan Balqis
as a Human Resource and Administration Manager and Operations Manager of the company which is
they not qualified to fill that position since they only have secondary school education background. In
the best interest for the benefit of the company En Zayed can appoint his family members but they must
have the qualification to fill up that position.
Secondly, En Zayed and Pn Hashimah charge personal vehicle expenses totaling RM50,150 to
the company accounts. As Managing Director and Chief Operating Officer of the company En Zayed and
Pn Hashimah should act bona fide for the benefit of the company. They have no proper recording of
personal transactions and companys transaction. In order to follow the Standard of Procedure the
personal expenses should not be recorded to the companys account and Cik Amy need to make an
adjustment which is debited to the director account and credited the expense of duties.
Lastly, Pn Hashimah act as a Chief Operating Officer but at the same time she was responsible
for all finance related matters and also make approval and payment of salaries. There is no segregation
of duties in the company because Pn Hashimah do various task at the same time and it will give
difficulties for Pn Hashimah to do work efficiently. Pn Hashimah should pass the duties to Human
Resource Department and only make approval and payment of salaries.







A Delima Case Study 12

Question 5
Who should be held responsible for effective leadership of management for Delima Enterprise Sdn
Bhd?
There are five person should held the responsibility of effective leadership of management for
Delima Enterprise Sdn. Bhd. One of those persons is Encik Zayed as CEO of company. CEO is responsible
for leading the development of companys long term strategy and also all day-to-day management
decision. Since the company activities had expanded then it is CEO responsibility to find several projects
to maximize the profit of company. For some cases such as shortage of fund, he is responsible to secure
these projects by applying for banking facilities and he as Managing Director also need to engaged the
external auditor to audit his companys financial statement. One of its functions is to fulfill the bank
requirement. To be effective leadership of management, he also should have knowledge in business
especially in term of Accounting Standard and the provision of the Companies Act 1965.
Second is Puan Hashimah as Chief Operating Officer of company. She is responsible to leading
and monitors the overall companys operation such as in production, marketing and sales, and
distribution. She has to act as role model to her staffs to ensure that they will perform their jobs
effectively and efficiently. Besides that; she is responsible to establishing procedure and processes to
ensure those are smooth functioning. For example for production procedure, only she can monitor the
product to be produce, authorize what product can be produce and verified any transactions. She also
needs to establish strategies to ensure the organizations short- and long-term goals and objectives are
achieved in accordance with plans and budgets. For example, to be the best employer to her employees
by give a good cooperation, assist them if they having problem in performing their jobs and willing to
share the knowledge with employees in order to run the business smoothly.
Third is Encik Salam as a Human Resources Manager. His responsibility is to recruit and select
candidates who are qualify to the job that needed by the company. For example, to assign a candidate
as Financial Executive, this person must have a knowledge in maintaining the accounting and financial
matters. Besides that, he should conduct an interview to select the best candidate that can fit with job
description. For example, if there any open of interview in the company, HR manager should involve in
select the best candidate. As HR manager, he is responsible in calculating wages for every worker who

A Delima Case Study 13

are right for their wages in the company and also design the organization chart to have a clear picture of
the position for every worker.
Forth is Puan Balqis as an Operational Manager. She is responsible to monitor day-by-day
operation in order to ensure that the business run smoothly. Normally the managers missions are to
increase the production and to reduce any wastage that will maximize the profit and incurred less losses
of company. She also responsible to communicate with staffs in operation department to ensure they
are in same goal and give the good cooperation to each other in running the business. As operational
manager, she also act as assistant of Chief Operation Officer in term of monitor the operation and do
report to COO if there any problems and suggestions in operation function.
Last but not least is Cik Amy as a Finance Executive. She is responsible to analyze and provide
the auditors with the necessary clarification and documentation. For example, she provides the
complete information and records are organizing and filed accordingly for easy reference. Besides that,
she needs to handle in maintenance of accounting and financial matters including the preparation of
accounts. For example, prepare proper Financial Statement such as trial balance, balance sheets and
also profit and loss statement. Since she had no working experience and a young Accounting graduate,
she needs to involve in training that provided by company to enhance her knowledge in order to
performing her job effectively and efficiently.










A Delima Case Study 14

Question 6
Could the audit be completed soon without any qualification?
Yes, the audit report can be completed soon without any qualification if Delima Enterprise give
full cooperation to the auditors such as assess of the documents, proper documentations, reconcile
accounts and other that related to audit field work. In this case, audit report can be classified as
qualified opinion report due to several unresolved issues. If the auditor audited the rest of financial
statements and is reasonably sure that they confirm with Genarally Accepted Accounting Principles
(GAAP), then the auditor simply states that the financial statements are fairly presented, with the
exception of the issues which could not be audited. If the Delima Enterprise could collect all the
information needed by the auditor and follow with proper guidelines and technique of accounting
standard the audit report can be unqualified. Furthermore, Cik Amy also need to give cooperation by
helping the auditors to clarify and discuss adjustment to treat the transaction to be made in order to
complete the audit work.












A Delima Case Study 15

Question 7
Design an appropriate organization chart.

Puan Hashimah
Chief Operating Officer
Encik Zayed
Chief Executive Officer
Operation
Manager
Project
Team
Administration
Manager
Payroll
Manager
Finance
Manager
Sales and Marketing
Manager
Vacant
Project Supervisor

Clerical
Assistant

Human Resource
Manager