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FCB PP

Flat Cargo Berhad was an air freight company in Malaysia that was engaged in fraudulent accounting practices. The auditor, Kencana & Associates, faced a dilemma in determining whether inconsistencies in FCB's accounts were due to fraud or weak management. The fraud was likely caused by pressure to increase revenues to pay dividends, opportunities due to lack of internal controls, and rationalization by individuals manipulating records. To address the problem, the recommended solution was to restructure the audit committee to achieve expertise and qualifications that could strengthen oversight and documentation of progress. While the auditor was not responsible for the fraud itself, shortcomings were identified in professional skepticism and communication with management.

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Najiha Yusof
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156 views9 pages

FCB PP

Flat Cargo Berhad was an air freight company in Malaysia that was engaged in fraudulent accounting practices. The auditor, Kencana & Associates, faced a dilemma in determining whether inconsistencies in FCB's accounts were due to fraud or weak management. The fraud was likely caused by pressure to increase revenues to pay dividends, opportunities due to lack of internal controls, and rationalization by individuals manipulating records. To address the problem, the recommended solution was to restructure the audit committee to achieve expertise and qualifications that could strengthen oversight and documentation of progress. While the auditor was not responsible for the fraud itself, shortcomings were identified in professional skepticism and communication with management.

Uploaded by

Najiha Yusof
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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GROUP D2

CASE 2-FLAT CARGO BERHAD:


AN AUDITORS Name
CONUNDRUM
Matric
Varatha Niesyah Ravindran
Logeswaran A/L Vasuthavan
Siti Najihah Binti Mohamed
Yusof
Nur Atiqah Bt Huzaini
Nazrul Faiz Bin Mugiono

no.
225812
225828
225858
225885
234454

INTRODUCTION
Flat Cargo Berhad (FCB) was one of the largest air freight companies in Malaysia.
Core business is air freight transportation, which included aircraft charter and
leasing.
Kencana & Associates served as its auditors.
This case attempts to bring out the whole accounting fraud issue at FCB from an
auditors perspective.
It creates an atmosphere of suspense and tension by portraying the dilemma of
an auditor.
The auditor was only able to reveal the dark secrets after years.
This case provides a penetrating view of the accounting fraud at FCB and other
related issues that aggravated the whole chaos.

STATEMENT OF THE PROBLEM

Auditors dilemma
whether Flat Cargo
Berhad practices
fraud or it is the
weakness of
management?

Inconsistencies in Flat
Cargo Berhad accounts
Weakness of corporate
governance in Flat Cargo
Berhad
Lack of auditor
competencies

CAUSES OF THE PROBLEM


Fraud Triangle Theory
Pressure
Increment of revenue to pay dividend
Opportunity
Lack of internal control
Rationalization

The individuals that committed a fraud by manipulating the


accounting records

CAUSES OF THE PROBLEM


(CONT)
Skills Need to have by an Auditor
Professional Skepticism
Effective Communication

International Standards on Auditing


According to this standard, if the auditor has identified a fraud or has
obtained information that indicates that a fraud may exist, the auditor shall
communicate
ISA 200: Professional Skepticism
ISA 240: Communications to Management and With Those Charged With
Governance

DECISION CRITERIA &


ALTERNATIVE SOLUTION
Eliminate
opportunities for
fraud to occur

Restructure the
audit committee

Audit committee
prepares
systematic
documentation
and report
progress
regularly to the
board

Strengthen the
internal audit

RECOMMENDED SOLUTION,
IMPLEMENTATION & JUSTIFICATION
Restructure the audit committee

Achieve a mix of expertise and qualification


Obtain well recognised professional paper such as
ACCA,ICAEW,MICPA-ICAA,CIMA and CPA Australia

CONCLUSION
Kencana as the external auditors of Flat Cargo
Berhad can be considered responsible for not
detecting the misstatement only but not
responsible for causing the fraud.
Kencana and Asscociates cannot bethe one that
solely blamed for this issue because the
mainparties responsiblefor
leadingthemisstatements and fraud are the Board
of Directors and Management of FCB.

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