Flat Cargo Berhad
C A S E 2
Asian Journal of Case
Research
4(S): 15 – 25 (2011)
Flat Cargo Berhad: An Auditor’s Conundrum
ZAKIAH MUHAMMADDUN MOHAMEDa* AND
TAKIAH MOHD ISKANDARb
ABSTRACT
Flat Cargo Berhad (FCB) was one of the largest air freight companies in Malaysia, servicing several government linked companies including
Freight Malaysia Berhad, and had Kencana & Associates served as its auditors. In 2006, during a routine financial audit, the auditors identified several suspicious findings that resulted in a delay in finalising the auditor’s report. The case presented an auditor’s dilemma involving the possibility of fraud in a financial audit engagement.
Keywords: fraud, auditors, professional scepticism
INTRODUCTION
It was 5 February 2006 and Mr Chuah Mun Soong had just finished a meeting with his audit team. He was silently enraged. “Not another Media Com or Blue Vital.
Could there be a fraud in Flat Cargo too?” he wondered. His firm, Kencana &
Associates, could not deal with another client scandal. He had just been informed by his subordinates that there had been inconsistencies in the accounts of Flat
Cargo Berhad (FCB). His team was to report to the audit committee of FCB in two weeks. His boss, Mr Keong Chee Wah, the managing partner of Kencana &
Associates, had to be informed immediately of the situation.. Taking time to calm himself down, Mr Chuah decided to work through the company’s information to assess the possibility of fraud. He needed the information to help him explain the situation to Mr Keong.
COMPANY BACKGROUND
FCB was a listed company operating primarily as an air cargo carrier. It was registered as an investment holding company with several subsidiaries. The principal activities of FCB subsidiaries included air freight services and aircraft School of Accounting, Faculty of Economics & Business, Universiti Kebangsaan Malaysia School of Accounting, Faculty of Economics & Business, Universiti Kebangsaan Malaysia
*
Asian Journal of Case
Research
4(S): 15 – 25 (2011)
Flat Cargo Berhad: An Auditor’s Conundrum
ZAKIAH MUHAMMADDUN MOHAMEDa* AND
TAKIAH MOHD ISKANDARb
ABSTRACT
Flat Cargo Berhad (FCB) was one of the largest air freight companies in Malaysia, servicing several government linked companies including
Freight Malaysia Berhad, and had Kencana & Associates served as its auditors. In 2006, during a routine financial audit, the auditors identified several suspicious findings that resulted in a delay in finalising the auditor’s report. The case presented an auditor’s dilemma involving the possibility of fraud in a financial audit engagement.
Keywords: fraud, auditors, professional scepticism
INTRODUCTION
It was 5 February 2006 and Mr Chuah Mun Soong had just finished a meeting with his audit team. He was silently enraged. “Not another Media Com or Blue Vital.
Could there be a fraud in Flat Cargo too?” he wondered. His firm, Kencana &
Associates, could not deal with another client scandal. He had just been informed by his subordinates that there had been inconsistencies in the accounts of Flat
Cargo Berhad (FCB). His team was to report to the audit committee of FCB in two weeks. His boss, Mr Keong Chee Wah, the managing partner of Kencana &
Associates, had to be informed immediately of the situation.. Taking time to calm himself down, Mr Chuah decided to work through the company’s information to assess the possibility of fraud. He needed the information to help him explain the situation to Mr Keong.
COMPANY BACKGROUND
FCB was a listed company operating primarily as an air cargo carrier. It was registered as an investment holding company with several subsidiaries. The principal activities of FCB subsidiaries included air freight services and aircraft School of Accounting, Faculty of Economics & Business, Universiti Kebangsaan Malaysia School of Accounting, Faculty of Economics & Business, Universiti Kebangsaan Malaysia
*
References: Business News (2005, November 5). Asia’s Air Cargo Industry Struggles with Continued Fuel Surcharges, Retrieved October 15, 2010 from http://www.prweb.com/