Mustapha Kamal Mohd Razali
Aini Aman
Azbir Abu Bakar
Yazmiza Long
Case Synopsis
The case is about an enterprise founded by family members and later was incorporated as Sdn Bhd. The shareholders were mainly the directors of husband and wife who were involved in the management of the company. The company involved in trading and engineering service3s. The company has limited financial resources. Based on the audit finding the records were not properly kept and no procedures and financial system were in place and lacked internal control. The auditors were not able to express a true & fair view on the accounts and recommended to qualify the audited accounts.
Introduction
It was July, 2006 when En Zayed engaged the external auditor Aziz & Co ( a Chartered Accountant), introduced by his friend to perform the statutory audit for the period of 2003 to 2006. This was the first audit experience for En. Zayed and Puan Hashimah and was a difficult learning experience faced by both. The Auditors expressed their intention to qualify the financial statements of the business due to several unresolved issues. However, En. Zayed and Puan Hashimah negotiated with the Auditor to not doing so. Failing to this negotiation, En Zayed and Puan Hashimah planned to terminate Aziz & Co appointment and to replace (appoint) with their new “friendly party” auditor. Interestingly, En Zayed and Puan Hashimah were not familiar with the Accounting Standards, provisions of the Companies Act 1965 and the roles and duties as Company Directors. Besides, the company maintained a very lean organization and had employed family members as their employees and a majority is without a necessary qualification and job experiences.
Time was essence. The audited financial statements had to be submitted to the bank latest by September 2006 because En Zayed had applied for bank loan facilities to kick start several projects that he had secured. The task of getting the financial statement audited,